PCTI PCTEL Inc

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

Quarter Highlights

• $26.5 million in revenue for the quarter, a decrease of five percent from the same period last year.
• Gross profit margin of 33 percent in the quarter, compared to 41 percent for the same period last year.
• GAAP operating margin of negative eight percent for the quarter, compared to operating margin of eight percent for the same period last year.
• GAAP net loss of $(1.1) million for the quarter, or $(0.06) per diluted share, compared to net income of $2.2 million, or $0.12 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 half a percent in the quarter, compared to 12 percent in the same period last year.
  • Non-GAAP net income of $108,000 or $0.01 per diluted share in the quarter, compared to $2.9 million or $0.16 per diluted share in the same period last year.
• $34.3 million of cash and short-term investments at September 30, 2015, a decrease of approximately $6.9 million from the preceding quarter. Free cash flow in the quarter was $461,000, comprised of $747,000 in cash flow from operations and $286,000 of capital spending. During the quarter the Company repurchased 1,114,000 shares of its common stock for approximately $6.9 million, and paid a regular quarterly dividend of $911,000.

“We made progress in our antenna and scanning receiver equipment business,” said Marty Singer, PCTEL’s Chairman and CEO. “At the same time our engineering services operations continue to weather the downturn in carrier spending and we are investing resources into our data analytics software product line. We expect our engineering services to expand with renewed spending during the fourth quarter and our data analytics investment to generate revenue in 2016,” 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: 13775112. 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: 13775112.

About PCTEL

PCTEL, a global provider of RF expertise, delivers Performance Critical Telecom solutions to the wireless industry. PCTEL benchmarks and optimizes wireless networks with its data tools, engineering services, and RF products. PCTEL's antennas and site solutions are vital elements for networks serving SCADA, fleet management, health care, public safety, and education.

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®® Touch, SeeHawk®® Collect, and SeeWave™ tools. PCTEL’s sophisticated engineering services utilize these products as well as the SeeHawk™ Analytics portfolio (Network Analytics, Subscriber Analytics, Map Analytics, and Business Intelligence).

PCTEL Connected Solutions designs and delivers performance critical antennas and site solutions for public and private wireless networks globally. PCTEL's performance critical 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 antenna and site solutions into carrier, railroad, utility applications, oil and gas, and other vertical markets.

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 third 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)     September 30, December 31, 2015 2014 ASSETS   Cash and cash equivalents $ 12,887 $ 20,432 Short-term investment securities 21,428 39,577 Accounts receivable, net of allowance for doubtful accounts of $119 and $121 at September 30, 2015 and December 31, 2014, respectively 20,643 23,874 Inventories, net 17,187 16,358 Deferred tax assets, net 2,279 2,281 Prepaid expenses and other assets   2,440     1,757   Total current assets 76,864 104,279   Property and equipment, net 14,042 14,842 Goodwill 3,493 161 Intangible assets, net 12,434 2,637 Deferred tax assets, net 10,348 9,710 Other noncurrent assets   36     40   TOTAL ASSETS $ 117,217   $ 131,669     LIABILITIES AND STOCKHOLDERS’ EQUITY   Accounts payable $ 5,631 $ 5,495 Accrued liabilities   6,430     10,211   Total current liabilities 12,061 15,706   Other long-term liabilities 930 448     Total liabilities   12,991     16,154     Stockholders’ equity: Common stock, $0.001 par value, 100,000,000 shares authorized, 17,815,573 and 18,571,419 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively 18 19 Additional paid-in capital 137,768 145,462 Accumulated deficit (33,619 ) (30,101 ) Accumulated other comprehensive income   59     135   Total stockholders’ equity   104,226     115,515     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 117,217   $ 131,669     PCTEL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data)                 Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014   REVENUES $ 26,526 $ 27,932 $ 80,477 $ 77,769 COST OF REVENUES   17,896     16,538   52,067     45,943 GROSS PROFIT   8,630     11,394   28,410     31,826 OPERATING EXPENSES: Research and development 2,863 2,659 8,506 8,970 Sales and marketing 3,603 3,054 10,558 9,312 General and administrative 2,847 3,120 9,513 9,822 Amortization of intangible assets 1,125 465 2,963 1,503 Restructuring charges   413     0   852     0 Total operating expenses   10,851     9,298   32,392     29,607 OPERATING INCOME (LOSS) (2,221 ) 2,096 (3,982 ) 2,219 Other income, net   534     207   2,783     738 INCOME (LOSS) BEFORE INCOME TAXES (1,687 ) 2,303 (1,199 ) 2,957 Expense (benefit) for income taxes   (625 )   85   (451 )   340 NET INCOME (LOSS)   ($1,062 ) $ 2,218   ($748 ) $ 2,617   Net Income (Loss) per Share: Basic ($0.06 ) $ 0.12 ($0.04 ) $ 0.14 Diluted ($0.06 ) $ 0.12 ($0.04 ) $ 0.14   Weighed Average Shares: Basic 17,626 18,112 18,059 18,155 Diluted 17,626 18,271 18,059 18,346   Cash dividend per share $ 0.05 $ 0.04 $ 0.15 $ 0.12   PCTEL, INC. P&L INFORMATION BY SEGMENT (unaudited) (in thousands)                         Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015 Connected RF Connected RF Solutions Solutions Corporate Total Solutions Solutions Corporate Total   REVENUES $ 17,450 $ 9,115 ($39 ) $ 26,526 $ 52,903 $ 27,749 ($175 ) $ 80,477                 GROSS PROFIT 4,729 3,894 7 8,630 15,588 12,802 20 28,410                 OPERATING INCOME (LOSS) $ 1,160   ($1,058 ) ($2,323 )   ($2,221 ) $ 4,255   ($181 ) ($8,056 )   ($3,982 )     Three Months Ended September 30, 2014 Nine Months Ended September 30, 2014 Connected RF Connected RF Solutions Solutions Corporate Total Solutions Solutions Corporate Total   REVENUES $ 18,697 $ 9,283 ($48 ) $ 27,932 $ 52,409 $ 25,578 ($218 ) $ 77,769                 GROSS PROFIT 5,803 5,584 7 11,394 16,635 15,171 20 31,826                 OPERATING INCOME (LOSS) $ 2,262 $ 2,492   ($2,658 ) $ 2,096   $ 5,278 $ 5,150   ($8,209 ) $ 2,219    

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 September 30, Nine Months Ended September 30,

2015

2014

2015

2014

  Operating Income (Loss) ($2,221 ) $ 2,096 ($3,982 ) $ 2,219   (a) Add: Amortization of intangible assets 1,125 465 2,963 1,503 Restructuring: -Cost of Goods Sold 132 0 246 0 -Restructuring 413 0 852 0 TelWorx investigation: -General & Administrative 9 188 100 686 Legal settlement: -General & Administrative 0 0 0 75 Stock Compensation: -Cost of Goods Sold 115 112 244 315 -Engineering 99 149 244 509 -Sales & Marketing 230 155 370 491 -General & Administrative   206     315     534     1,263   2,329 1,384 5,553 4,842         Non-GAAP Operating Income $ 108   $ 3,480   $ 1,571   $ 7,061   % of revenue 0.4 % 12.5 % 2.0 % 9.1 %  

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

  Three Months Ended September 30, Nine Months Ended September 30,

2015

2014

2015

2014

  Net Income (Loss) ($1,062 ) $ 2,218 ($748 ) $ 2,617   Adjustments: (a) Non-GAAP adjustment to operating income 2,329 1,384 5,553 4,842 (b) Other income related to SEC investigation of TelWorx (10 ) (188 ) (99 ) (660 ) (b) Legal Settlement - Amendment to Nexgen APA (500 ) 0 (2,660 ) 0 (b) Legal Settlement - other 0 0 0 (75 ) (b) Income Taxes   (649 )   (545 )   (738 )   (932 ) 1,170 651 2,056 3,175         Non-GAAP Net Income $ 108   $ 2,869   $ 1,308   $ 5,792     Non-GAAP Earning per Share: Basic $ 0.01 $ 0.16 $ 0.07 $ 0.32 Diluted $ 0.01 $ 0.16 $ 0.07 $ 0.32   Weighed Average Shares: Basic 17,626 18,112 18,059 18,155 Diluted 17,809 18,271 18,428 18,346    

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 September 30, 2015 Nine Months Ended September 30, 2015 Connected RF Connected RF Solutions Solutions Corporate Total Solutions Solutions Corporate Total     Operating Income (Loss) $ 1,160 ($1,058 ) ($2,323 ) ($2,221 ) $ 4,255 ($181 ) ($8,056 ) ($3,982 )   Add: Amortization of intangible assets 195 930 0 1,125 655 2,308 0 2,963 TelWorx investigation: -General & Administrative 0 0 9 9 0 0 100 100 Restructuring: -Cost of Goods Sold 132 0 0 132 246 0 0 246 -Restructuring charges 113 300 0 413 538 314 0 852 Stock Compensation: -Cost of Goods Sold 40 75 0 115 54 190 0 244 -Engineering (5 ) 104 0 99 55 189 0 244 -Sales & Marketing 88 142 0 230 173 197 0 370 -General & Administrative   16     44   146     206     6   43   485     534   579 1,595 155 2,329 1,727 3,241 585 5,553                 Non-GAAP Operating Income (Loss) $ 1,739   $ 537   ($2,168 ) $ 108   $ 5,982 $ 3,060   ($7,471 ) $ 1,571       Three Months Ended September 30, 2014 Nine Months Ended September 30, 2014 Connected RF Connected RF Solutions Solutions Corporate Total Solutions Solutions Corporate Total     Operating Income (Loss) $ 2,262 $ 2,492 ($2,658 ) $ 2,096 $ 5,278 $ 5,150 ($8,209 ) 2,219   Add: Amortization of intangible assets 261 204 0 465 891 612 0 1,503 TelWorx investigation: -General & Administrative 0 0 188 188 0 0 686 686 Legal settlement: -General & Administrative 0 0 0 0 0 0 75 75 Stock Compensation: -Cost of Goods Sold 58 54 0 112 157 158 0 315 -Engineering 63 86 0 149 229 280 0 509 -Sales & Marketing 122 33 0 155 401 90 0 491 -General & Administrative   54     31   230     315     202   98   963     1,263   558 408 418 1,384 1,880 1,238 1,724 4,842                 Non-GAAP Operating Income (Loss) $ 2,820   $ 2,900   ($2,240 ) $ 3,480   $ 7,158 $ 6,388   ($6,485 ) $ 7,061      

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