PCTEL Reports Second Quarter Financial Results - Form 8-K

•

Revenues increased 15.2% year-over-year to $25.0 million

•

GAAP gross profit margin of 45.8%

•

GAAP net income of $0.4 million or $0.02 per diluted share

•

Non-GAAP net income of $1.8 million or $0.10 per diluted share

•

Adjusted EBITDA increased 18% year-over-year to $2.6 million

•

Launched new 5G, 10-in-1 combination antenna portfolio for rail, fleet, and mass transit, supporting the Company's commitment to innovative product development

•

Received multimillion dollar orders from two of its largest OEM customers for the Gflex^® and HBflex™ scanning receivers

•

Revenue increased 15.2% to $25.0 million, compared to $21.7 million in the second quarter of 2021.

o

Antennas and IIoT Devices revenue was $17.6 million, an increase of 12.8% year-over-year due to an increase in revenues related to antennas for fleet applications and a full quarter of revenue recognized from Smarteq, which was acquired at the end of April 2021.

o

Test & Measurement products revenue was $7.4 million, an increase of 15.9% year-over-year due to higher revenues for 5G products in the U.S.

•

GAAP gross margin was 45.8% compared to 45.9% for the second quarter of 2021. Non-GAAP gross margin was 46.0% compared to 47.5% in the second quarter of 2021 due to lower gross margin for antennas and devices.

•

GAAP operating expenses were $11.1 million compared to $10.1 million in the second quarter of 2021. Non-GAAP operating expenses were $9.7 million compared to $8.8 million in the second quarter of 2021. Operating expenses include a full quarter of expenses related to Smarteq in the second quarter 2022 versus two months of expenses in the second quarter 2021.

•

GAAP net income was $0.4 million or diluted earnings per share of $0.02 compared to GAAP net loss of $(0.2) million or $(0.01) per share in the second quarter of 2021. Restructuring expenses related to the manufacturing transition in China were $0.02 per share in the second quarter 2022 compared to $0.00 in the second quarter 2021.

•

Non-GAAP net income was $1.8 million or $0.10 diluted earnings per share compared to $1.3 million or $0.07 in the second quarter of 2021.

•

Adjusted EBITDA increased by 18% to $2.6 million compared to $2.2 million in the second quarter of 2021.

•

Cash, cash equivalents and investments were $28.3 million, an increase of approximately $0.6 million as compared to the first quarter of 2022 as free cash flow of $1.6 million offset cash used in financing activities of $0.6 million.

•

Revenue: $25.5 million to $26.5 million

•

Non-GAAP Gross Margin: 44% to 45%

•

Non-GAAP EPS: $0.09 to $0.11

PCTEL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share data)

June 30,

December 31,

2022

2021

ASSETS

Cash and cash equivalents

$

5,797

$

8,192

Short-term investment securities

22,276

22,562

'Accounts receivable, net of allowances of $79 and $64 at June 30, 2022 and

December 31, 2021, respectively

19,311

18,905

Inventories, net

14,189

13,691

Prepaid expenses and other assets

1,774

1,747

Total current assets

63,347

65,097

Property and equipment, net

10,784

11,949

Long-term investment securities

250

0

Goodwill

5,986

6,334

Intangible assets, net

1,231

1,579

Other noncurrent assets

2,314

2,438

TOTAL ASSETS

$

83,912

$

87,397

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable

$

5,630

$

5,360

Accrued liabilities

9,867

11,117

Total current liabilities

15,497

16,477

Long-term liabilities

3,732

3,999

Total liabilities

19,229

20,476

Stockholders' equity:

Common stock, $0.001 par value, 50,000,000 shares authorized at

June 30, 2022 and December 31, 2021, respectively, and 18,677,851 and 18,238,030

shares issued and outstanding at June 30, 2022 and December 31, 2021

19

18

Additional paid-in capital

123,844

123,998

Accumulated deficit

(57,888

)

(56,735

)

Accumulated other comprehensive loss

(1,292

)

(360

)

Total stockholders' equity

64,683

66,921

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

83,912

$

87,397

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021

REVENUES

$

24,976

$

21,681

$

47,518

$

39,388

COST OF REVENUES

13,549

11,739

26,758

21,108

GROSS PROFIT

11,427

9,942

20,760

18,280

OPERATING EXPENSES:

Research and development

3,356

3,221

6,605

6,416

Sales and marketing

3,908

3,388

7,310

6,151

General and administrative

3,451

3,335

6,694

6,411

Amortization of intangible assets

67

55

138

55

Restructuring expenses

317

60

1,252

60

Total operating expenses

11,099

10,059

21,999

19,093

OPERATING INCOME (LOSS)

328

(117

)

(1,239

)

(813

)

Other income (expense), net

114

(45

)

125

(6

)

INCOME (LOSS) BEFORE INCOME TAXES

442

(162

)

(1,114

)

(819

)

Expense for income taxes

31

7

39

12

NET INCOME (LOSS)

$

411

$

(169

)

$

(1,153

)

$

(831

)

Net Income (Loss) per Share:

Basic

$

0.02

$

(0.01

)

$

(0.06

)

$

(0.05

)

Diluted

$

0.02

$

(0.01

)

$

(0.06

)

$

(0.05

)

Weighted Average Shares:

Basic

18,157

18,241

18,065

18,158

Diluted

18,157

18,241

18,065

18,158

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

Six Months Ended June 30,

2022

2021

Operating Activities:

Net loss

$

(1,153

)

$

(831

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

1,562

1,493

Intangible asset amortization

177

70

Stock-based compensation

1,860

1,657

Loss on disposal of property and equipment

7

3

Restructuring costs

(328

)

45

Bad debt provision

17

(34

)

Changes in operating assets and liabilities:

Accounts receivable

(614

)

1,260

Inventories

(715

)

(1,121

)

Prepaid expenses and other assets

100

532

Accounts payable

435

(630

)

Income taxes payable

(1

)

(18

)

Other accrued liabilities

(900

)

624

Deferred revenue

(126

)

63

Net cash provided by operating activities

321

3,113

Investing Activities:

Capital expenditures

(420

)

(1,266

)

Purchases of investments

(15,587

)

(16,058

)

Redemptions/maturities of short-term investments

15,623

26,278

Cash paid for acquisition, net of cash acquired

0

(6,277

)

Net cash (used in) provided by investing activities

(327

)

7,100

Financing Activities:

Proceeds from issuance of common stock

404

418

Payment of withholding tax on stock-based compensation

(396

)

(782

)

Principal payments on finance leases

(37

)

(35

)

Purchase of common stock from repurchase program

0

(733

)

Cash dividends

(2,021

)

(2,018

)

Net cash used in financing activities

(2,050

)

(3,150

)

Net (decrease) increase in cash and cash equivalents

(2,113

)

2,640

Effect of exchange rate changes on cash

(282

)

24

Cash and cash equivalents, beginning of period

8,192

5,761

Cash and Cash Equivalents, End of Period

$

5,797

$

8,425

PCTEL, INC.

REVENUE AND GROSS PROFIT BY PRODUCT LINE (unaudited)

Reconciliation of GAAP Gross Profit percentage to Non-GAAP Gross Profit percentage

(in thousands)

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

Antennas and Industrial IoT Devices

Test & Measurement Products

Corporate

Total

Antennas and Industrial IoT Devices

Test & Measurement Products

Corporate

Total

REVENUES

$

17,555

$

7,431

$

(10

)

$

24,976

$

34,657

$

13,014

$

(153

)

$

47,518

GROSS PROFIT

$

5,626

$

5,759

$

42

$

11,427

$

10,873

$

9,921

$

(34

)

$

20,760

GAAP GROSS PROFIT %

32.0

%

77.5

%

45.8

%

31.4

%

76.2

%

43.7

%

Non-GAAP adjustments:

Amortization of inventory step-up

0.0

%

0.0

%

0.0

%

0.0

%

0.0

%

0.0

%

Amortization of intangible assets

0.1

%

0.0

%

0.1

%

0.1

%

0.0

%

0.1

%

Stock compensation expenses

0.3

%

-0.2

%

0.1

%

0.2

%

0.2

%

0.2

%

Non-GAAP GROSS PROFIT %

32.4

%

77.3

%

46.0

%

31.7

%

76.4

%

44.0

%

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

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

%

1.2

%

1.0

%

0.0

%

0.7

%

Amortization of intangible assets

0.1

%

0.0

%

0.1

%

0.1

%

0.0

%

0.0

%

Stock compensation expenses

0.2

%

0.5

%

0.3

%

0.2

%

0.5

%

0.4

%

Non-GAAP GROSS PROFIT %

35.4

%

75.9

%

47.5

%

34.0

%

75.2

%

47.5

%

This schedule reconciles the Company's GAAP gross profit percentage to its Non-GAAP gross profit 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 and stock compensation expenses.

Reconciliation of GAAP to Non-GAAP results (unaudited)

(in thousands except per share information)

Reconciliation of GAAP operating income (loss) to Non-GAAP operating income

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Operating Income (Loss)

$

328

$

(117

)

$

(1,239

)

$

(813

)

(a)

Add:

Amortization of inventory step-up to fair value

0

283

0

283

Amortization of intangible assets

-Cost of revenues

19

15

39

15

-Operating expenses

67

55

138

55

Restructuring expenses

317

60

1,252

60

Stock compensation expenses:

-Cost of revenues

31

65

96

134

-Research and development

172

140

308

282

-Sales & marketing

255

226

452

386

-General & administrative

628

608

1,004

855

Acquisition related expenses

0

121

86

304

1,489

1,573

3,375

2,374

Non-GAAP Operating Income

$

319

$

106

$

319

$

106

% of revenue

7.3

%

6.7

%

4.5

%

4.0

%

Reconciliation of GAAP net loss to Non-GAAP net income

Three Months Ended March 31,

Three Months Ended March 31,

2022

2021

2022

2021

Net Income (Loss)

$

411

$

(169

)

$

(1,153

)

$

(831

)

Adjustments:

(a)

Non-GAAP adjustments to operating loss

1,489

1,573

3,375

2,374

(b)

Income Taxes

(123

)

(106

)

(142

)

(112

)

1,366

1,467

3,233

2,262

Non-GAAP Net Income

$

1,777

$

1,298

$

2,080

$

1,431

Non-GAAP Income per Share:

Basic

$

0.10

$

0.07

$

0.12

$

0.08

Diluted

$

0.10

$

0.07

$

0.11

$

0.08

Weighed Average Shares:

Basic

18,157

18,241

18,065

18,158

Diluted

18,157

18,191

18,122

18,158

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, restructuring expenses, and acquisition related expenses. 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 expenses to Non-GAAP operating expenses (unaudited)

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

GAAP operating expenses

$

11,099

$

10,059

$

21,999

$

19,093

Stock compensation expenses

(1,055

)

(974

)

(1,764

)

(1,523

)

Amortization of intangible assets

(67

)

(55

)

(138

)

(55

)

Restructuring expenses

(317

)

(60

)

(1,252

)

(60

)

Acquisition related expenses

0

(121

)

(86

)

(304

)

Non-GAAP Operating expenses

$

9,660

$

8,849

$

18,759

$

17,151

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 to adjusted EBITDA (unaudited)

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Operating income (loss)

$

328

$

(117

)

$

(1,239

)

$

(813

)

Add:

Amortization of inventory step-up to fair value

0

283

0

283

Depreciation and amortization

781

751

1,562

1,493

Intangible amortization

86

70

177

70

Restructuring expenses

317

60

1,252

60

Stock compensation expenses

1,086

1,039

1,860

1,657

Acquisition related expenses

0

121

86

304

Adjusted EBITDA

$

2,598

$

2,207

$

3,698

$

3,054

% of revenue

10.4

%

10.2

%

7.8

%

7.8

%

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, restructuring expenses, and acquisition related expenses.