PCTEL Reports Second Quarter Financial Results

BLOOMINGDALE, Ill.--(BUSINESS WIRE)--PCTEL, Inc. (Nasdaq: PCTI) announced its results for the second quarter ended June 30, 2021.

Highlights

• Revenue of $21.7 million in the second quarter, 9.3% higher compared to the second quarter 2020 and $4.0 million higher compared to the first quarter 2021.
• Gross profit margin of 45.9% in the second quarter, down 2.1% compared to the gross profit margin in the second quarter 2020. The gross profit percentage decline in the second quarter is primarily due to a higher mix of antennas and Industrial IoT devices.
• GAAP net income per diluted share of ($0.01) in the second quarter compared to $0.07 in the second quarter 2020.
• 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 $0.07 in the second quarter compared to Non-GAAP net income per diluted share of $0.11 in the second quarter 2020.
  • Adjusted EBITDA as a percent of revenue of 10.2% in the second quarter compared to 14.4% in the second quarter 2020.
• $33.4 million of cash and investments and $0.1 million of debt at June 30, 2021 compared to $41.0 million and no debt at December 31, 2020.

“Our antenna business was stable and the test and measurement products continue to perform very well as we address 5G deployments and emerging public safety opportunities,” said David Neumann, PCTEL’s CEO. “We’re excited about our recent acquisition of Smarteq Wireless AB, a leading European supplier of antennas for vehicular, energy and Industrial IoT applications (“Smarteq”). Smarteq’s design wins for Industrial IoT, EV charging stations and vehicles complement our recent antenna design wins in utilities, 5G and metering. We expect market conditions and the demand for our antenna, IoT device and scanner products to improve through the year as global economies recover.”

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 [phone] (United States/Canada) or [phone] (International), PIN number: 592274. 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 [phone] (United States/Canada), or [phone] (International), PIN number: 42253.

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 Industrial IoT and test and measurement businesses; the impact of the acquisition of Smarteq on the Company’s ability to offer additional products, expand in the European market, and generate revenue; 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. 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; the Company’s ability to integrate Smarteq, expand its European presence and benefit from additional antenna and Industrial IoT product offerings; 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 is a registered trademark of PCTEL, Inc. © 2021 PCTEL, Inc. All rights reserved.

PCTEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except share data)
	June 30,			December 31,
	2021			2020
ASSETS
Cash and cash equivalents	$	8,425		$	5,761
Short-term investment securities		25,002			30,582
Accounts receivable, net of allowances of $80 and $113 at June 30, 2021 and December 31, 2020, respectively		16,786			16,601
Inventories, net		12,391			9,984
Prepaid expenses and other assets		1,583			1,685
Total current assets		64,187			64,613
Property and equipment, net		12,390			12,505
Long-term investment securities		0			4,640
Goodwill		6,522			3,332
Intangible assets, net		1,873			0
Other noncurrent assets		2,573			2,441
TOTAL ASSETS	$	87,545		$	87,531
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	4,723		$	4,430
Accrued liabilities		9,454			7,316
Total current liabilities		14,177			11,746
Long-term liabilities		4,345			4,387
Total liabilities		18,522			16,133
Stockholders’ equity:
Common stock, $0.001 par value, 50,000,000 shares authorized at June 30, 2021 and December 31, 2020, respectively, and 18,518,515 and 18,429,350 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		19			18
Additional paid-in capital		126,791			128,250
Accumulated deficit		(57,719	)		(56,888	)
Accumulated other comprehensive income		(68	)		18
Total stockholders’ equity		69,023			71,398
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	87,545		$	87,531

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2021			2020		2021			2020
REVENUES	$	21,681		$	19,842	$	39,388		$	37,348
COST OF REVENUES		11,739			10,321		21,108			19,612
GROSS PROFIT		9,942			9,521		18,280			17,736
OPERATING EXPENSES:
Research and development		3,221			3,070		6,416			6,099
Sales and marketing		3,388			2,397		6,151			5,539
General and administrative		3,335			2,945		6,411			5,747
Amortization of intangible assets		55			0		55			33
Restructuring expenses		60			11		60			98
Total operating expenses		10,059			8,423		19,093			17,516
OPERATING (LOSS) INCOME		(117	)		1,098		(813	)		220
Other (expense) income, net		(45	)		102		(6	)		300
(LOSS) INCOME BEFORE INCOME TAXES		(162	)		1,200		(819	)		520
Expense for income taxes		7			8		12			16
NET (LOSS) INCOME	$	(169	)	$	1,192	$	(831	)	$	504
Net (Loss) Income per Share:
Basic	$	(0.01	)	$	0.07	$	(0.05	)	$	0.03
Diluted	$	(0.01	)	$	0.07	$	(0.05	)	$	0.03
Weighted Average Shares:
Basic		18,241			18,159		18,158			18,180
Diluted		18,241			18,214		18,158			18,352
Cash dividend per share	$	0.055		$	0.055	$	0.110		$	0.110

PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
	Six Months Ended June 30,
.	2021			2020
Operating Activities:
Net (loss) income	$	(831	)	$	504
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		1,493			1,502
Intangible asset amortization		70			144
Stock-based compensation		1,657			1,563
Loss on disposal of property and equipment		3			7
Restructuring costs		45			(28	)
Bad debt provision		(34	)		(110	)
Changes in operating assets and liabilities:
Accounts receivable		1,260			2,065
Inventories		(1,121	)		882
Prepaid expenses and other assets		532			871
Accounts payable		(630	)		810
Income taxes payable		(18	)		16
Other accrued liabilities		624			(1,167	)
Deferred revenue		63			19
Net cash provided by operating activities		3,113			7,078
Investing Activities:
Capital expenditures		(1,266	)		(2,418	)
Purchase of investments		(16,058	)		(26,323	)
Redemptions/maturities of short-term investments		26,278			25,781
Cash paid for acquisition, net of cash acquired		(6,277	)		0
Net cash provided by (used in) investing activities		2,677			(2,960	)
Financing Activities:
Proceeds from issuance of common stock		418			496
Proceeds from Paycheck Protection Program Loan		0			3,500
Repayment of Paycheck Protection Program Loan		0			(3,500	)
Payment of withholding tax on stock-based compensation		(782	)		(1,106	)
Principle payments on finance leases		(35	)		(41	)
Purchase of common stock from repurchase program		(733	)		(2,000	)
Cash dividends		(2,018	)		(2,054	)
Net cash used in financing activities		(3,150	)		(4,705	)
Net increase (decrease) in cash and cash equivalents		2,640			(587	)
Effect of exchange rate changes on cash		24			(49	)
Cash and cash equivalents, beginning of period		5,761			7,094
Cash and Cash Equivalents, End of Period	$	8,425		$	6,458

PCTEL, INC.
REVENUE AND GROSS PROFIT BY PRODUCT LINE (unaudited)
Reconciliation of GAAP Gross Margin percentage to Non-GAAP Gross Margin Percentage
($'s in thousands)
	Three Months Ended June 30, 2021				Six Months Ended June 30, 2021
	Antennas and Industrial IoT Devices	Test & Measurement Products	Corporate	Total	Antennas and Industrial IoT Devices	Test & Measurement Products	Corporate	Total
REVENUES	$15,562	$6,414	($295)	$21,681	$27,285	$12,619	($516)	$39,388
GROSS PROFIT	$5,175	$4,834	($67)	$9,942	$8,922	$9,422	($64)	$18,280
GAAP GROSS PROFIT %	33.3%	75.4%		45.9%	32.7%	74.7%		46.4%
Non-GAAP adjustments:
Amortization of inventory step-up	1.8%	0.0%		1.3%	0.0%	0.0%		0.7%
Amortization of intangible assets	0.1%	0.0%		0.1%	0.0%	0.0%		0.0%
Stock compensation expenses	0.2%	0.5%		0.3%	0.2%	0.5%		0.3%
Non-GAAP GROSS PROFIT %	35.4%	75.9%		47.5%	32.9%	75.2%		47.5%
	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
	Antennas and Industrial IoT Devices	Test & Measurement Products	Corporate	Total	Antennas and Industrial IoT Devices	Test & Measurement Products	Corporate	Total
REVENUES	$13,910	$6,118	($186)	$19,842	$25,370	$12,201	($223)	$37,348
GROSS PROFIT	$4,973	$4,609	($61)	$9,521	$8,892	$8,905	($61)	$17,736
GROSS PROFIT %	35.8%	75.3%		48.0%	35.0%	73.0%		47.5%
Non-GAAP adjustments:
Amortization of intangible assets	0.0%	0.0%		0.0%	0.0%	0.9%		0.3%
Stock compensation expenses	0.3%	0.6%		0.4%	0.3%	0.6%		0.4%
Non-GAAP GROSS PROFIT %	36.0%	76.0%		48.4%	35.3%	74.5%		48.2%
The Corporate column includes the elimination of intercompany revenues between Antennas and Industrial IoT Devices and Test & Measurement Products and other licensing revenues.
This schedule reconciles the Company's GAAP gross margin percentage to its Non-GAAP gross margin percentage. 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 adjustments on this schedule consist of amortization of intangible assets, stock compensation expenses, and the amortizaion of the inventory step-up to fair value related to the acquisition of Smarteq.

Reconciliation of GAAP to non-GAAP Results (unaudited)
(in thousands except per share information)
Reconciliation of GAAP operating income (loss) to non-GAAP operating loss
		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
	Operating Income (Loss)	($117	)	$1,098		($813	)	$220
(a)	Add:
	Amortization of inventory step-up to fair value	283		0		283		0
	Amortization of intangible assets:
	-Cost of revenues	15		0		15		111
	-Operating expenses	55		0		55		33
	Restructuring	60		11		60		98
	Stock compensation expenses:
	-Cost of revenues	65		74		134		146
	-Research and development	140		145		282		282
	-Sales & marketing	226		164		386		314
	-General & administrative	608		618		855		821
	Acquisition related expenses	121		0		304		0
		1,573		1,012		2,374		1,805
	Non-GAAP Operating Income	$1,456		$2,110		$1,561		$2,025
	% of revenue	6.7	%	10.6	%	4.0	%	5.4	%
Reconciliation of GAAP net loss to non-GAAP net (loss) income
		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
	Net Income (Loss)	($169	)	$1,192		($831	)	$504
	Adjustments:
(a)	Non-GAAP adjustments to operating income (loss)	1,573		1,012		2,374		1,805
(b)	Income Taxes	(106	)	(169	)	(112	)	(170	)
		1,467		843		2,262		1,635
	Non-GAAP Net Income	$1,298		$2,035		$1,431		$2,139
	Non-GAAP Income per Share:
	Basic	$0.07		$0.11		$0.08		$0.12
	Diluted	$0.07		$0.11		$0.08		$0.12
	Weighed Average Shares:
	Basic	18,241		18,159		18,158		18,180
	Diluted	18,241		18,214		18,158		18,352
	This schedule reconciles the Company's GAAP operating income (loss) 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 (Loss) (a) consist of stock compensation expense, amortization of intangible assets, amortization of the step-up to fair value of the inventory for Smarteq, and acquisition related expenses. The adjustments to GAAP Net Income (Loss) include the non-GAAP adjustments to operating income (loss) well as adjustments for (b) non-cash income tax expense.

PCTEL, INC.
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating expenses (unaudited)
(in thousands)
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
GAAP Operating expenses	10,059		8,423		19,093		17,516
Stock compensation expenses	(974	)	(927	)	(1,523	)	(1,417	)
Amortization of intangible assets	(55	)	0		(55	)	(33	)
Restructuring expenses	(60	)	(11	)	(60	)	(98	)
Acquisition related expenses	(121	)	0		(304	)	0
Non-GAAP Operating expenses	8,849		7,485		17,151		15,968
This schedule reconciles the Company's GAAP operating expenses to its Non-GAAP operating expenses. 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 adjustments on this schedule consist of amortization of intangible assets, stock compensation expenses, restructuring expenses, and acquisition related expenses.

PCTEL, Inc.
Reconciliation of GAAP operating (loss) income to Adjusted EBITDA
(unaudited, in thousands)
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Operating (Loss) Income	($117	)	$1,098		($813	)	$220
Add:
Amortization of inventory step-up to fair value	283		0		283		0
Depreciation and amortization	751		754		1,493		1,502
Intangible amortization	70		0		70		144
Restructuring expenses	60		11		60		98
Stock compensation expenses	1,039		1,001		1,657		1,563
Acquisition related expenses	121		0		304		0
Adjusted EBITDA	$2,207		$2,864		$3,054		$3,527
% of revenue	10.2	%	14.4	%	7.8	%	9.4	%
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 and extraordinary expenses. The adjustments on this schedule consist of depreciation, amortization of intangible assets, stock compensation expenses, the amortization of inventory step up to fair value, restructuring and acquisition related expenses.