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PCTEL Achieves $27.9 Million in Third Quarter Revenue

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PCTEL, Inc. (NASDAQ:PCTI) , a leader in Performance Critical Telecom solutions, announced its 2014 third quarter results.

Third Quarter Highlights

$27.9 million in revenue for the quarter, an increase of six percent from the same period last year and an increase of $1.8 million over the second quarter of this year.

Gross profit margin of 41 percent in the quarter, unchanged from the same period last year.

GAAP operating margin from continuing operations of eight percent for the quarter, compared to operating margin of four percent for the same period last year.

GAAP net income from continuing operations of $2.2 million for the quarter, or $0.12 per diluted share, compared to net income of $751,000 from continuing operations, or $0.04 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, one-time gains or losses, 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 from continuing operations of 12 percent in the quarter, compared to 11 percent from the same period last year.

Non-GAAP net income from continuing operations of $2.9 million or $0.16 per diluted share in the quarter, compared to $2.3 million or $0.13 per diluted share from the same period last year representing a 26 percent increase.

$58.9 million of cash, short-term investments at September 30, 2014, an increase of approximately $5.0 million from the preceding quarter. During the quarter the company paid $750,000 in dividends, and generated approximately $5.75 million of cash and investments from all other sources.

“We enjoyed a strong quarter in network engineering, IBflexTM scanning receivers, new OEM antenna design wins, mobile towers and small cell site solution deployment,” said Marty Singer, PCTEL’s Chairman and CEO. “We anticipate continued demand from China’s LTE carriers, execution against our strong small cell site solution backlog, expansion of our broadband wireless antenna business and new applications for our industry-leading GNSS antennas. The demand for in-building, ODAS, and wireless capacity in dense venues should drive continued growth of our network engineering services operation and in-building solutions,” 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: 13775108. 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: 13775108.

About PCTEL

PCTEL delivers Performance Critical Telecom solutions. RF Solutions develops and provides test equipment, software, and engineering services for wireless networks. Engineers rely upon PCTEL to visualize, benchmark, and optimize wireless networks. Connected SolutionsTM designs and delivers performance critical antennas and site solutions for wireless networks globally. Our antennas support evolving wireless standards for cellular, private, and broadband networks. PCTEL antennas and site solutions support networks worldwide, including SCADA for oil, gas and utilities, fleet management, industrial operations, health care, small cell and network timing deployment, defense, public safety, education, and broadband access.

PCTEL’s performance critical products include its SeeGull(R) scanning receivers and CW Transmitter, SeeHawk(R) and SeeHawk(R) TouchTM analytic software, and its SeeWaveTM interference locating system. PCTEL is recognized globally for its industry leading-edge IBflexTM, EXflexTM, and MX scanning receivers and its sophisticated in-building Network Engineering Services (NES).

PCTEL’s performance critical MAXRAD(R) and BluewaveTM 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 provide performance critical mobile towers for demanding emergency and oil and gas network applications and 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 contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Specifically, the statements regarding the growth of PCTEL’s in-building engineering services and scanning receiver sales, the performance of the Connected Solutions business and the anticipated success of our new antenna and scanning receiver products, 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 ability to successfully grow the wireless products business and the 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,
2014 2013
ASSETS
Cash and cash equivalents $19,345 $21,790
Short-term investment securities 39,546 36,105
Accounts receivable, net of allowance for doubtful accounts
of $145 and $130 at September 30, 2014 and December 31, 2013, respectively 20,236 18,603
Inventories, net 16,367 14,535
Deferred tax assets, net 2,303 1,629
Prepaid expenses and other assets 1,444 3,166
Total current assets 99,241 95,828
Property and equipment, net 14,898 14,971
Goodwill 161 161
Intangible assets, net 3,102 4,604
Deferred tax assets, net 10,685 11,827
Other noncurrent assets 39 41
TOTAL ASSETS $128,126 $127,432
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable $5,436 $4,440
Accrued liabilities 8,495 7,803
Total current liabilities 13,931 12,243
Other long-term liabilities 551 3,137
Total liabilities 14,482 15,380
Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares
authorized, 18,503,259 and 18,566,119 shares issued and
outstanding at September 30, 2014 and December 31, 2013, respectively 19 19
Additional paid-in capital 144,804 143,572
Accumulated deficit (31,355 ) (31,748 )
Accumulated other comprehensive income 176 209
Total stockholders’ equity 113,644 112,052
TOTAL LIABILITIES AND EQUITY $128,126 $127,432
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
REVENUES $27,932 $26,471 $77,769 $78,290
COST OF REVENUES 16,538 15,695 45,943 47,373
GROSS PROFIT 11,394 10,776 31,826 30,917
OPERATING EXPENSES:
Research and development 2,659 2,735 8,970 7,963
Sales and marketing 3,054 2,912 9,312 8,986
General and administrative 3,120 3,576 9,822 12,034
Amortization of intangible assets 465 596 1,503 1,804
Restructuring charges 0 29 0 254
Total operating expenses 9,298 9,848 29,607 31,041
OPERATING INCOME (LOSS) 2,096 928 2,219 (124 )
Other income, net 207 389 738 4,778
INCOME BEFORE INCOME TAXES 2,303 1,317 2,957 4,654
Expense for income taxes 85 566 340 1,764
NET INCOME FROM CONTINUING OPERATIONS 2,218 751 2,617 2,890
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT 0 0 0 (109 )
NET INCOME $2,218 $751 $2,617 $2,781
Earnings per Share from Continuing Operations:
Basic $0.12 $0.04 $0.14 $0.16
Diluted $0.12 $0.04 $0.14 $0.16
Loss per Share from Discontinued Operations:
Basic $0.00 $0.00 $0.00 ($0.01 )
Diluted $0.00 $0.00 $0.00 ($0.01 )
Earnings per Share:
Basic $0.12 $0.04 $0.14 $0.16
Diluted $0.12 $0.04 $0.14 $0.15
Weighed Average Shares:
Basic 18,112 17,841 18,155 17,766
Diluted 18,271 18,354 18,346 18,093
Cash dividend per share $0.040 $0.035 $0.120 $0.105
PCTEL, INC.
P&L INFORMATION BY SEGMENT – Continuing Operations
(in thousands)
Three Months Ended September 30, 2014 Nine Months Ended September 30, 2014
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF 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
Three Months Ended September 30, 2013 Nine Months Ended September 30, 2013
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total
REVENUES $18,318 $8,243 ($90 ) $26,471 $56,874 $21,617 ($201 ) $78,290
GROSS PROFIT 5,684 5,090 2 10,776 17,352 13,547 18 30,917
OPERATING INCOME (LOSS) $1,738 $2,098 ($2,908 ) $928 $4,872 $5,139 ($10,135 ) ($124 )

Reconciliation GAAP To non-GAAP Results Of Continuing Operations (unaudited)

(in thousands except per share information)

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

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

2014

2013

2014

2013

Operating Income (Loss) $2,096 $928 $2,219 ($124 )
(a) Add:
Amortization of intangible assets 465 596 1,503 1,804
TelWorx restructuring:
-Restructuring charges 0 29 0 254
-Cost of Goods Sold 0 0 0 284
TelWorx investigation:
-General & Administrative 188 389 686 1,880
Legal settlement
-General & Administrative 0 0 75 0
Stock Compensation:
-Cost of Goods Sold 112 104 315 295
-Engineering 149 182 509 505
-Sales & Marketing 155 174 491 435
-General & Administrative 315 438 1,263 1,384
1,384 1,912 4,842 6,841
Non-GAAP Operating Income $3,480 $2,840 $7,061 $6,717
% of revenue 12.5 % 10.7 % 9.1 % 8.6 %

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

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

2014

2013

2014

2013

Net Income from Continuing Operations $2,218 $751 $2,617 $2,890
Adjustments:
(a) Non-GAAP adjustment to operating income 1,384 1,912 4,842 6,841
Other income related to the TelWorx settlement and TelWorx SEC investigation (188 ) (389 ) (660 ) (4,768 )
Other legal settlements 0 0 (75 ) 0
(b) Income Taxes (545 ) 55 (932 ) 553
651 1,578 3,175 2,626
Non-GAAP Net Income from Continuing Operations $2,869 $2,329 $5,792 $5,516
Non-GAAP Earning per Share:
Basic $0.16 $0.13 $0.32 $0.31
Diluted $0.16 $0.13 $0.32 $0.30
Weighed Average Shares:
Basic 18,112 17,841 18,155 17,766
Diluted 18,271 18,354 18,346 18,093
This schedule reconciles the Company’s GAAP operating income and GAAP net income 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 TelWorx investigation.
(b) These adjustments include the items described in footnote (a) as well as other income for the TelWorx legal settlement and
insurance claims related to the TelWorx investigation, and non-cash income tax expense.

Reconciliation GAAP To non-GAAP SEGMENT INFORMATION (unaudited) (a) – Continuing Operations

(in thousands except per share information)
Three Months Ended September 30, 2014 Nine Months Ended September 30, 2014
Connected Connected

Solutions

RF Solutions Corporate Total Solutions RF 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 restructuring:
-Restructuring charges 0 0 0 0 0 0 0 0
-Cost of Goods Sold 0 0 0 0 0 0 0 0
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
Three Months Ended September 30, 2013 Nine Months Ended September 30, 2013
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total
Operating Income (Loss) $1,738 $2,098 ($2,908 ) $928 $4,872 $5,139 ($10,135 ) ($124 )
Add:
Amortization of intangible assets 392 204 0 596 1,181 623 0 1,804
TelWorx restructuring:
-Restructuring charges 29 0 0 29 254 0 0 254
-Cost of Goods Sold 0 0 0 0 284 0 0 284
TelWorx investigation:
-General & Administrative 0 0 389 389 0 0 1,880 1,880
Stock Compensation:
-Cost of Goods Sold 44 60 0 104 109 186 0 295
-Engineering 77 105 0 182 207 298 0 505
-Sales & Marketing 127 47 0 174 328 107 0 435
-General & Administrative 95 34 309 438 249 76 1,059 1,384
764 450 698 1,912 2,612 1,290 2,939 6,841
Non-GAAP Operating Income (Loss) $2,502 $2,548 ($2,210 ) $2,840 $7,484 $6,429 ($7,196 ) $6,717
This schedule reconciles the Company’s GAAP operating income by segment 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 TelWorx investigation.

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