PCTel PCTel

PCTEL Reports $23.3 Million in Fourth Quarter Revenue

March 15, 2018

$91.4 Million for the Full Year

BLOOMINGDALE, Ill.--(BUSINESS WIRE)--Mar. 15, 2018-- PCTEL, Inc. (Nasdaq: PCTI), a leader in Performance Critical TELecom solutions, announced its results for the fourth quarter and the full year ended December 31, 2017.

Highlights from Continuing Operations

  • Revenue of $23.3 million in the quarter and $91.4 million for the year, down 1% in the quarter and up 8% for the year compared to last year. Connected Solutions revenue was down 9% in the quarter and up 4% for the year. RF Solutions was up 25% in the quarter and up 19% for the year.
  • Gross profit margin of 44.0% in the quarter and 42.4% for the year, up 265 basis pointsin the quarter and up 200 basis points for the year compared to last year.
  • Net income per diluted share of $0.19 in the fourth quarter and $0.24 for the year, an improvement of $0.47 per share in the quarter and $1.03 per share in the year. Approximately $0.03 per share of the improvement in the quarter and $0.13 per share in the year are attributed to improved operating results. The remainder is a result of non-cash changes in the Company’s deferred tax assets and related valuation allowance.
  • 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 net income per diluted share of $0.08 in the fourth quarter and $0.28 for the year, unchanged in the quarter and up $0.07 for the year compared to last year.
    • Adjusted EBITDA margin as a percent of revenue of 10% in the fourth quarter and 9% for the year, up 55 basis points in the quarter and 95 basis points for the year compared to last year.
  • $38.1 million of cash and short-term investments and no debt at December 31, 2017. The Company generated free cash flow (cash flow from operations less capital spending) from continuing operations of approximately $2.1 million in the quarter and $7.1 million for the year.

“We are pleased to see revenue growth in both segments. Fleet and utilities markets continue to lead the growth in antennas and we closed several large scanning receiver deals through our OEM partners in the quarter,” said David Neumann, PCTEL’s CEO. “PCTEL is well positioned to take advantage of the long-term growth opportunities in Industrial IoT and 5G, which require both performance critical antenna solutions across multiple vertical markets and RF test equipment.”

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: 47850719. The call will also be webcast at http://investor.pctel.com/events.cfm.

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: 47850719.

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 antenna 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 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, 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.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
       
 
December 31, December 31,
2017 2016
ASSETS
 
Cash and cash equivalents $ 5,559 $ 14,855
Short-term investment securities 32,499 18,456
Accounts receivable, net of allowance for doubtful accounts of $319 and $273 at
December 31, 2017 and December 31, 2016, respectively 18,427 19,101
Inventories, net 12,756 14,442
Prepaid expenses and other assets 1,605 1,498
Current assets held for sale   0     50  
Total current assets 70,846 68,402
Property and equipment, net 12,369 11,833
Goodwill 3,332 3,332
Intangible assets, net 2,113 3,275
Deferred tax assets, net 7,734 4,512
Other noncurrent assets 72 36
Non-current assets held for sale   0     776  
TOTAL ASSETS $ 96,466   $ 92,166  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Accounts payable $ 5,471 $ 6,073
Accrued liabilities   7,284     7,177  
Total current liabilities 12,755 13,250
 
Long-term liabilities 392 391
   
Total liabilities   13,147     13,641  
 
Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 17,806,792 and 17,335,122
shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively 18 17
Additional paid-in capital 134,505 134,480
Accumulated deficit (51,258 ) (55,590 )
Accumulated other comprehensive loss   54     (382 )
Total stockholders’ equity   83,319     78,525  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 96,466   $ 92,166  
 
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
           
 
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
 
REVENUES $ 23,301 $ 23,623 $ 91,437 $ 85,006
COST OF REVENUES   13,056     13,860     52,626     50,595  
GROSS PROFIT   10,245     9,763     38,811     34,411  
OPERATING EXPENSES:
Research and development 3,002 2,577 11,142 10,158
Sales and marketing 3,236 3,646 12,630 12,716
General and administrative 3,028 2,873 13,110 11,905
Amortization of intangible assets 124 124 496 531
Restructuring expenses   0     0     0     234  
Total operating expenses   9,390     9,220     37,378     35,544  
OPERATING INCOME (LOSS) 855 543 1,433 (1,133 )
Other income, net   32     63     105     112  
INCOME (LOSS) BEFORE INCOME TAXES 887 606 1,538 (1,021 )
(Benefit) expense for income taxes   (2,402 )   5,173     (2,471 )   11,776  
NET INCOME (LOSS) FROM CONTINUING OPERATIONS 3,289 (4,567 ) 4,009 (12,797 )
NET LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT   (39 )   (760 )   (187 )   (4,884 )
NET INCOME (LOSS) $ 3,250   $ (5,327 ) $ 3,822   $ (17,681 )
 
Net Income (Loss) per Share From Continuing Operations:
Basic $ 0.19 $ (0.28 ) $ 0.24 $ (0.79 )
Diluted $ 0.19 $ (0.28 ) $ 0.24 $ (0.79 )
 
Net Loss per Share From Discontinued Operations:
Basic $ (0.00 ) $ (0.05 ) $ (0.01 ) $ (0.30 )
Diluted $ (0.00 ) $ (0.05 ) $ (0.01 ) $ (0.30 )
 
Net Income (Loss) per Share:
Basic $ 0.19 $ (0.33 ) $ 0.23 $ (1.09 )
Diluted $ 0.19 $ (0.33 ) $ 0.23 $ (1.09 )
 
Weighted Average Shares:
Basic 16,926 16,194 16,626 16,151
Diluted 17,299 16,194 16,913 16,151
 
Cash dividend per share $ 0.055 $ 0.05 $ 0.210 $ 0.20
 
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
       
 
Year Ended December 31,

 

2017 2016
 
Operating Activities:
Net income (loss) from continuing operations $ 4,009 $ (12,797 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 2,567 2,629
Intangible asset amortization 1,162 1,198
Stock-based compensation 3,005 3,847
Loss on disposal/sale of property and equipment 18 2
Restructuring costs (78 ) 30
Deferred tax provision (2,647 ) 11,048
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 853 1,695
Inventories 1,970 2,863
Prepaid expenses and other assets (121 ) 44
Accounts payable (1,037 ) (484 )
Income taxes payable (199 ) 81
Other accrued liabilities 182 929
Deferred revenue   85     40  
Net cash provided by operating activities   9,769     11,125  
 
Investing Activities:
Capital expenditures (2,666 ) (1,739 )
Proceeds from disposal of property and equipment 1 15
Purchases of investments (49,009 ) (74,264 )
Redemptions/maturities of short-term investments   34,966     80,536  
Net cash (used in) provided by investing activities   (16,708 )   4,548  
 
Financing Activities:
Proceeds from issuance of common stock 1,975 649
Payments for repurchase of common stock 0 (4,095 )
Payment of withholding tax on stock-based compensation (1,298 ) (426 )
Principle payments on capital leases (98 ) (51 )
Cash dividends   (3,705 )   (3,456 )
Net cash used in financing activities   (3,126 )   (7,379 )
.
Cash flows from discontinued operations:
Net cash used in operating activities (795 ) (242 )
Net cash provided by (used in) investing activities   1,434     (173 )
Net cash provided by (used in) discontinued operations   639     (415 )
 
Net (decrease) increase in cash and cash equivalents (9,426 ) 7,879
Effect of exchange rate changes on cash 130 (79 )
Cash and cash equivalents, beginning of year   14,855     7,055  
Cash and Cash Equivalents, End of Period $ 5,559   $ 14,855  
 
PCTEL, INC.
P&L INFORMATION BY SEGMENT - Continuing Operations (unaudited)
(in thousands)
                   
Three Months Ended December 31, 2017 Year Ended December 31, 2017
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total
 
REVENUES $16,487 $6,861 ($47 ) $23,301 $68,612 $23,019 ($194 ) $91,437
               
GROSS PROFIT 5,157 5,077 11 10,245 22,439 16,354 18 38,811
               
OPERATING (LOSS) INCOME $1,517 $1,869 ($2,531 ) $855 $8,304 $4,177 ($11,048 ) $1,433  
 
 
Three Months Ended December 31, 2016 Year Ended December 31, 2016
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total
 
REVENUES $18,147 $5,488 ($12 ) $23,623 $65,763 $19,419 ($176 ) $85,006
               
GROSS PROFIT 5,671 4,070 22 9,763 20,706 13,690 15 34,411
               
OPERATING (LOSS) INCOME $2,177 $701 ($2,335 ) $543 $7,804 $1,042 ($9,979 ) ($1,133 )
 

Reconciliation of GAAP to non-GAAP Results - Continuing Operations (unaudited)

(in thousands except per share information)
             

Reconciliation of GAAP operating income (loss) to non-GAAP operating income - Continuing Operations (a)

 

Three Months Ended December 31,

Year Ended December 31,

2017

2016

2017

2016

 
 
Operating Income (Loss) $855 $543 $1,433 ($1,133 )
 
(a) Add:
Amortization of intangible assets
-Cost of revenues 167 167 666 668
-Operating expenses 124 124 496 531
Restructuring 0 0 0 234
TelWorx investigation:
-General & administrative 0 0 0 4
Stock Compensation:
-Cost of revenues 68 63 268 282
-Engineering 123 125 517 650
-Sales & marketing 112 140 474 617
-General & administrative 244   451   1,745   2,298  
838   1,070   4,166   5,284  
Non-GAAP Operating Income $1,693   $1,613   $5,599   $4,151  
% of revenue 7.3 % 6.8 % 6.1 % 4.9 %
 

Reconciliation of GAAP net income (loss) to non-GAAP net (loss) income - Continuing Operations (b)

 

Three Months Ended December 31,

Year Ended December 31,

2017

2016

2017

2016

 
Net Income (Loss) $3,289 ($4,567 ) $4,009 ($12,797 )
 
Adjustments:
(a) Non-GAAP adjustment to operating income (loss) 838 1,070 4,166 5,284
(b) Other income related to SEC investigation of TelWorx 0 0 0 (4 )
(b) Income Taxes (2,713 ) 4,871   (3,498 ) 11,009  
(1,875 ) 5,941   668   16,289  
Non-GAAP Net Income $1,414   $1,374   $4,677   $3,492  
 
Non-GAAP Earning per Share:
Basic $0.08 $0.08 $0.28 $0.22
Diluted $0.08 $0.08 $0.28 $0.21
 
Weighed Average Shares:
Basic 16,926 16,194 16,626 16,151
Diluted 17,299 16,439 16,913 16,325

This schedule reconciles the Company's GAAP operating income (loss) and GAAP net income (loss) to its non-GAAP operating income and non-GAAP net 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.

(a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the SEC investigation of TelWorx.

(b) These adjustments include the items described in footnote (a) as well as other income for insurance claims related to the SEC investigation of TelWorx, and non-cash income tax expense.

 

Reconciliation of GAAP to non-GAAP SEGMENT INFORMATION - Continuing Operations (unaudited) (a)

(in thousands)
 
    Three Months Ended December 31, 2017     Year Ended December 31, 2017
Connected   RF     Connected   RF    
Solutions Solutions Corporate Total Solutions Solutions Corporate Total
 
Operating Income (Loss) $1,517 $1,869 ($2,531) $855 $8,304 $4,177 ($11,048) $1,433
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 0 666 0 666
-Operating expenses 39 85 0 124 156 340 0 496
Stock Compensation:
-Cost of revenues 40 28 0 68 161 107 0 268
-Engineering 63 60 0 123 243 274 0 517
-Sales & marketing 72 40 0 112 314 160 0 474
-General & administrative 46 19 179 244 180 68 1,497 1,745
260 399 179 838 1,054 1,615 1,497 4,166
Non-GAAP Operating (Loss) Income $1,777 $2,268 ($2,352) $1,693 $9,358 $5,792 ($9,551) $5,599
 
 
Three Months Ended December 31, 2016 Year Ended December 31, 2016
Connected RF

 

 

Connected RF

 

Total
Solutions Solutions

Corporate

Total

Solutions Solutions

Corporate

 
 
Operating (Loss) Income $2,177 $701 ($2,335) $543 $7,804 $1,042 ($9,979) ($1,133)
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 0 668 0 668
-Operating expenses 39 85 0 124 191 340 0 531
Restructuring expenses 0 0 0 0 44 117 73 234
TelWorx investigation:
-General & administrative 0 0 0 0 0 0 4 4
Stock Compensation:
-Cost of revenues 43 20 0 63 178 104 0 282
-Engineering 48 77 0 125 172 478 0 650
-Sales & marketing 99 41 0 140 438 179 0 617
-General & administrative 51 82 318 451 209 340 1,749 2,298
280 472 318 1,070 1,232 2,226 1,826 5,284
Non-GAAP Operating (Loss) Income $2,457 $1,173 ($2,017) $1,613 $9,036 $3,268 ($8,153) $4,151

This schedule reconciles the Company's GAAP operating income (loss) by segment 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.

(a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the SEC investigation of TelWorx.

               

PCTEL, Inc.

Reconciliation of GAAP operating income (loss) to Adjusted EBITDA - Continuing Operations (a)

(unaudited, in thousands)
 
 
 

Three Months Ended December 31,

Year Ended December 31,

2017

2016

2017

2016

 
Operating Income (Loss) $855 $543 $1,433 ($1,133)
 
(a) Add:
Depreciation and amortization 653 635 2,566 2,629
Intangible amortization 291 291 1,162 1,199
Stock compensation expenses 547 779 3,004 3,847
Restructuring expense 0 0 0 234
TelWorx investigation- operating expenses 0 0 0 4
Adjusted EBITDA $2,346 $2,248 $8,165 $6,780
% of revenue 10.1% 9.5% 8.9% 8.0%

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.

(a) Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization. These adjustments reflect depreciation, amortization of intangible assets, stock compensation expenses, restructuring expenses, and general and administrative expenses associated with the SEC investigation of TelWorx.

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

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