PCTI PCTEL Inc

An Increase of Six Percent from the Same Period Last Year

PCTEL, Inc. (NASDAQ:PCTI), a leader in Performance Critical Telecom solutions, announced its 2015 second quarter results.

First Quarter Highlights

• $27.6 million in revenue for the quarter, an increase of six percent from the same period last year.
• Gross profit margin of 35 percent in the quarter, compared to 41 percent for the same period last year.
• GAAP operating margin of negative six percent for the quarter, compared to operating margin of two percent for the same period last year.
• GAAP net income of $347,000 for the quarter, or $0.02 per diluted share, compared to net income of $545,000, or $0.03 per diluted share for the same period last year.
• Non-GAAP operating profit and net income are measures the company uses to reflect the results of its core earnings. The Company’s reporting of non-GAAP net income excludes expenses for restructuring, gain or loss on sale of assets, stock based compensation, amortization and impairment of intangible assets and goodwill related to the Company’s acquisitions, and non-cash related income tax expense.
  • Non-GAAP operating margin of one percent in the quarter, compared to nine percent in the same period last year.
  • Non-GAAP net income of $295,000 or $0.02 per diluted share in the quarter, compared to $2.0 million or $0.11 per diluted share in the same period last year.
• $41.3 million of cash and short-term investments at June 30, 2015, an increase of approximately $2.4 million from the preceding quarter. Free cash flow in the quarter was $6.0 million, comprised of $6.9 million in cash flow from operations and $933,000 of capital spending. During the quarter the Company repurchased 380,000 shares of its common stock for approximately $2.8 million, paid a regular quarterly dividend of $929,000.

“As we have opened up new markets in China and expanded our field of play with network analytics and services, we have also been exposed to additional risks,” said Marty Singer, PCTEL’s Chairman and CEO. “Challenges are not new to us and we are confident in our growth in both business operations,” added Singer.

CONFERENCE CALL / WEBCAST

PCTEL’s management team will discuss the Company’s results today at 5:15 PM ET. The call can be accessed by dialing (877) 734-5369 (U.S. / Canada) or (706) 679-6397 (International), conference ID: 13775111. 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: 13775111.

About PCTEL

PCTEL delivers Performance Critical Telecom solutions. The industry relies upon PCTEL to benchmark network performance, analyze trends, and optimize wireless networks. PCTEL's antennas and site solutions are vital elements for SCADA, oil and gas, utilities, fleet management, health care, public safety, education, small cell, and network timing.

PCTEL’s RF Solutions products and services improve the performance of wireless networks globally. PCTEL’s performance critical products include its MXflex®®, IBflex®®, and EXflex®® SeeGull®® scanning receivers and related SeeHawk®® and SeeWave™ tools. PCTEL’s sophisticated engineering services utilize these products as well as the Meridian™ network analytics portfolio (Map IQ™, Network IQ™, and Subscriber IQ™).

PCTEL Connected Solutions™ designs and delivers performance critical antennas and site solutions for wireless networks globally. PCTEL's performance critical MAXRAD®® and Bluewave™ antenna solutions include high rejection and high performance GPS and GNSS products, the industry leading Yagi portfolio, mobile and indoor LTE, broadband, and LMR antennas and PIM-rated antennas for transit, in-building, and small cell applications. We leverage our design, logistics, and support capabilities to deliver performance critical site solutions into carrier, railroad, and utility applications.

PCTEL's products are sold worldwide through direct and indirect channels. For more information, please visit the company's web sites: www.pctel.com, www.antenna.com, or www.rfsolutions.pctel.com.

PCTEL Safe Harbor Statement

This press release and our related comments in our second quarter 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, new products and features, expectations regarding the future growth of our antenna and wireless RF businesses, and demand for engineering services 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 customer demand for these types of products and services generally, PCTEL’s ability to successfully grow the wireless products business, and its ability to implement new technologies and obtain protection for the related intellectual property. 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, 2015 2014 ASSETS   Cash and cash equivalents $16,184 $20,432 Short-term investment securities 25,075 39,577 Accounts receivable, net of allowance for doubtful accounts of $108 and $121 at June 30, 2015 and December 31, 2014, respectively 21,667 23,874 Inventories, net 17,696 16,358 Deferred tax assets, net 2,149 2,281 Prepaid expenses and other assets 2,131 1,757 Total current assets 84,902 104,279   Property and equipment, net 14,628 14,842 Goodwill 4,123 161 Intangible assets, net 12,929 2,637 Deferred tax assets, net 9,710 9,710 Other noncurrent assets 36 40 TOTAL ASSETS $126,328 $131,669   LIABILITIES AND STOCKHOLDERS’ EQUITY   Accounts payable $5,811 $5,495 Accrued liabilities 6,961 10,211 Total current liabilities 12,772 15,706   Other long-term liabilities 1,426 448     Total liabilities 14,198 16,154   Stockholders’ equity: Common stock, $0.001 par value, 100,000,000 shares authorized, 18,555,427 and 18,571,419 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively 19 19 Additional paid-in capital 143,616 145,462 Accumulated deficit (31,646) (30,101) Accumulated other comprehensive income 141 135 Total stockholders’ equity 112,130 115,515   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $126,328 $131,669   PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data)               Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014   REVENUES $27,625 $26,182 $53,951 $49,837 COST OF REVENUES 18,034   15,331 34,171   29,405 GROSS PROFIT 9,591   10,851 19,780   20,432 OPERATING EXPENSES: Research and development 2,904 3,069 5,642 6,311 Sales and marketing 3,425 3,303 6,955 6,258 General and administrative 3,302 3,470 6,665 6,702 Amortization of intangible assets 1,185   464 1,839   1,038 Total operating expenses 11,256   10,306 21,541   20,309 OPERATING INCOME (LOSS) (1,665 ) 545 (1,761 ) 123 Other income, net 2,205   334 2,249   531 INCOME BEFORE INCOME TAXES 540 879 488 654 Expense for income taxes 193   334 174   255 NET INCOME $347   $545 $314   $399   Net Income per Share: Basic $0.02 $0.03 $0.02 $0.02 Diluted $0.02 $0.03 $0.02 $0.02   Weighed Average Shares: Basic 18,257 18,165 18,284 18,166 Diluted 18,408 18,291 18,498 18,350   Cash dividend per share $0.05 $0.04 $0.10 $0.08   PCTEL, INC. P&L INFORMATION BY SEGMENT (unaudited) (in thousands)                     Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 Connected RF Connected Solutions Solutions Corporate Total Solutions RF Solutions Corporate Total   REVENUES $18,100 $9,583 ($58 ) $27,625 $35,454 $18,634 ($137 ) $53,951                 GROSS PROFIT 5,417 4,173 1 9,591 10,861 8,908 11 19,780                 OPERATING INCOME (LOSS) $1,498 ($347 ) ($2,816 ) ($1,665 ) $3,187 $786 ($5,734 ) ($1,761 )     Three Months Ended June 30, 2014 Six Months Ended June 30, 2014 Connected RF Connected Solutions Solutions Corporate Total Solutions RF Solutions Corporate Total   REVENUES $17,715 $8,574 ($107 ) $26,182 $33,712 $16,295 ($170 ) $49,837                 GROSS PROFIT 5,716 5,129 6 10,851 10,832 9,587 13 20,432                 OPERATING INCOME (LOSS) $1,845 $1,645   ($2,945 ) $545   $3,015 $2,659 ($5,551 ) $123    

Reconciliation of GAAP to non-GAAP Results (unaudited)

(in thousands except per share information)              

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

  Three Months Ended June 30,   Six Months Ended June 30,

2015

2014

2015

2014

  Operating Income (Loss) ($1,665 ) $545 ($1,761 ) $123   (a) Add: Amortization of intangible assets 1,185 464 1,839 1,038 Restructuring: -Cost of Goods Sold 114 0 114 0 -Restructuring 440 0 440 0 TelWorx investigation: -General & Administrative 54 263 91 498 Legal settlement: -General & Administrative 0 75 0 75 Stock Compensation: -Cost of Goods Sold 56 117 129 203 -Engineering 30 187 145 360 -Sales & Marketing (18 ) 189 140 336 -General & Administrative 173   603   328   948   2,034 1,898 3,226 3,458         Non-GAAP Operating Income $369   $2,443   $1,465   $3,581   % of revenue 1.3 % 9.3 % 2.7 % 7.2 %  

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

  Three Months Ended June 30, Six Months Ended June 30,

2015

2014

2015

2014

  Net Income $347 $545 $314 $399   Adjustments: (a) Non-GAAP adjustment to operating income 2,034 1,898 3,226 3,458 (b) Other income related to SEC investigation of TelWorx (54 ) (252 ) (90 ) (472 ) (b) Legal Settlement - Amendment to Nexgen APA (2,160 ) 0 (2,160 ) 0 (b) Legal Settlement - other 0 (75 ) 0 (75 ) (b) Income Taxes 128   (107 ) (90 ) (387 ) (52 ) 1,464 886 2,524         Non-GAAP Net Income $295   $2,009   $1,200   $2,923     Non-GAAP Earning per Share: Basic $0.02 $0.11 $0.07 $0.16 Diluted $0.02 $0.11 $0.06 $0.16   Weighed Average Shares: Basic 18,257 18,165 18,284 18,166 Diluted 18,408 18,291 18,498 18,350  

This schedule reconciles the Company's GAAP operating loss and GAAP net 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, legal settlements, and non-cash income tax expense.

 

Reconciliation of GAAP To non-GAAP SEGMENT INFORMATION (unaudited) (a)

(in thousands except per share information)                       Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 Connected RF Connected Solutions Solutions Corporate Total Solutions RF Solutions Corporate Total     Operating Income (Loss) $1,498 ($347 ) ($2,816 ) ($1,665 ) $3,187 $786 ($5,734 ) ($1,761 )   Add: Amortization of intangible assets 230 955 0 1,185 460 1,379 0 1,839 TelWorx investigation: -General & Administrative 0 0 54 54 0 0 91 91 Restructuring: -Cost of Goods Sold 114 0 0 114 114 0 0 114 -Restructuring charges 426 14 0 440 426 14 0 440 Stock Compensation: -Cost of Goods Sold (22 ) 78 0 56 14 115 0 129 -Engineering 14 16 0 30 60 85 0 145 -Sales & Marketing (18 ) 0 0 (18 ) 85 55 0 140 -General & Administrative (35 ) (21 ) 229   173   (10 ) (1 ) 339   328   709 1,042 283 2,034 1,149 1,647 430 3,226                 Non-GAAP Operating Income (Loss) $2,207   $695   ($2,533 ) $369   $4,336   $2,433   ($5,304 ) $1,465       Three Months Ended June 30, 2014 Six Months Ended June 30, 2014 Connected RF Connected Solutions Solutions Corporate Total Solutions RF Solutions Corporate Total     Operating Income (Loss) $1,845 $1,645 ($2,945 ) $545 $3,015 $2,659 ($5,551 ) $123   Add: Amortization of intangible assets 260 204 0 464 630 408 0 1,038 TelWorx investigation: -General & Administrative 0 0 263 263 0 0 498 498 Legal settlement: -General & Administrative 0 0 75 75 0 0 75 75 Stock Compensation: -Cost of Goods Sold 54 63 0 117 99 104 0 203 -Engineering 86 101 0 187 166 194 0 360 -Sales & Marketing 150 39 0 189 279 57 0 336 -General & Administrative 63   36   504   603   149   67   732   948   613 443 842 1,898 1,323 830 1,305 3,458                 Non-GAAP Operating Income (Loss) $2,458   $2,088   ($2,103 ) $2,443   $4,338   $3,489   ($4,246 ) $3,581  

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

 

(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.

 

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PCTEL, Inc.John SchoenCFO(630) 372-6800orJack SellerPublic Relations(630)372-6800Jack.seller@pctel.com