OREANDA-NEWS. August 03, 2016. PCTEL, Inc. (NASDAQ:PCTI), a leader in Performance Critical Telecom solutions, announced its 2016 second quarter results.

Quarter Highlights

\\$24.2 million in revenue for the quarter, a decrease of 12 percent from the same period last year. The Company saw a 15 percent sequential quarterly increase in revenue from the first quarter.

GAAP gross profit margin of 38 percent in the quarter compared to 34 percent for the same period last year.

GAAP operating margin of negative 22 percent for the quarter compared to operating margin of negative six percent for the same period last year. During the quarter the company recorded a non-cash impairment of its acquired intangible assets related to its engineering services of \\$4.7 million, or 19 percent of revenue.

GAAP net loss of \\$11.1 million for the quarter, or \\$(0.69) per diluted share compared to net income of \\$347,000, or \\$0.02 per diluted share for the same period last year. In addition to the \\$4.7 million impairment of intangible assets, the Company recorded expense for the establishment of a \\$7.6 million valuation allowance on the Company's U.S. based deferred tax assets to address a growing shift in the Company's income outside of the United States that began this quarter. The after tax impact of the charges aggregate to \\$0.66 per diluted share.

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 gross margin of 39 percent in the quarter, compared to 34 percent for the same period last year.

Non-GAAP operating margin of six percent in the quarter, compared to one percent for the same period last year.

Non-GAAP net income of \\$1.3 million, or \\$0.08 per diluted share in the quarter, compared to \\$295,000 or \\$0.02 per diluted share in the same period last year.

\\$29.3 million of cash and short-term investments at June 30, 2016, an increase of approximately \\$1.4 million from the preceding quarter. During the quarter the Company generated free cash flow of approximately \\$2.4 million and paid a dividend of \\$853,000.

"Scanning receiver sales, engineering and staffing services, and core antenna products all posted sequential quarterly gains this past quarter," said

Marty Singer, PCTEL's Chairman and CEO. "This growth, combined with our success in reducing operating expenses to 2013 levels, resulted in an eleven cent improvement in non-GAAP earnings compared to our first quarter. We also made strong progress in reducing our inventory across both businesses and launching new products, including our new SeeHawk Engage™ product. We look forward to a strong second half," 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 (888) 782-7027 (U.S. / Canada) or (706) 679-6397 (International), conference ID: 47815074. 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: 47815074.

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 SeeGull MXflex®, IBflex®, and EXflex® scanning receivers. PCTEL tools also include CW transmitters, signal analyzers, and the SeeWave® interference locating system. PCTEL's SeeHawk® software portfolio includes SeeHawk® Touch, SeeHawk® Collect, SeeHawk Engage™, SeeHawk Engage+™, SeeHawk Engage™ Lite, SeeHawk™ Studio, and SeeHawk™ Analytics. PCTEL provides specialized staffing, interference management and performance critical RF engineering services for wireless networks.

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 GNSS products and innovative broadband LTE and Wi-Fi solutions for fixed and mobile applications, including transit, in-building, and small cell networks. In addition, PCTEL provides a broad portfolio of LMR and Yagi antennas. 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: pctel.com, antenna.com, or rfsolutions.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 regarding our future financial performance, new products and features, growth of our Connected Solutions and RF Solutions businesses, and anticipated demand for our network analytics, subject matter expert staffing and in-building 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, growth and continuity in the utilities, fleet, and public safety markets and small cell deployments, PCTEL's ability to successfully grow Engage and its wireless products business generally, 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,
2016 2015
ASSETS
Cash and cash equivalents \\$ 7,305 \\$ 7,055
Short-term investment securities 21,973 24,728
Accounts receivable, net of allowance for doubtful accounts of \\$264 and \\$314 at

June 30, 2016 and December 31, 2015, respectively

18,191 21,001
Inventories, net 15,190 17,596
Prepaid expenses and other assets 1,448 1,586
Total current assets 64,107 71,966
Property and equipment, net 13,615 13,839
Goodwill 3,332 3,332
Intangible assets, net 5,141 11,378
Deferred tax assets, net 8,949 13,155
Other noncurrent assets 38 40
TOTAL ASSETS \\$ 95,182 \\$ 113,710
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable \\$ 4,719 \\$ 6,735
Accrued liabilities 5,792 6,190
Total current liabilities 10,511 12,925
Other long-term liabilities 473 388
Total liabilities 10,984 13,313
Stockholders' equity:
Common stock, \\$0.001 par value, 100,000,000 shares authorized, 17,324,506 and

17,654,236 shares issued and outstanding at June 30, 2016 and December 31, 2015,

respectively

17 18
Additional paid-in capital 133,880 135,714
Accumulated deficit (49,572 ) (35,320 )
Accumulated other comprehensive loss (127 ) (15 )
Total stockholders' equity 84,198 100,397
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY \\$ 95,182 \\$ 113,710
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
REVENUES \\$ 24,243 \\$ 27,625 \\$ 45,317 \\$ 53,951
COST OF REVENUES 15,006 18,276 29,029 34,432
GROSS PROFIT 9,237 9,349 16,288 19,519
OPERATING EXPENSES:
Research and development 2,523 2,904 5,130 5,642
Sales and marketing 3,414 3,425 6,529 6,955
General and administrative 3,305 3,302 6,267 6,665
Amortization of intangible assets 577 943 1,180 1,578
Impairment of intangible assets 4,724 0 4,724 0
Restructuring expenses 24 440 541 440
Total operating expenses 14,567 11,014 24,371 21,280
OPERATING LOSS (5,330 ) (1,665 ) (8,083 ) (1,761 )
Other income, net 8 2,205 14 2,249
(LOSS) INCOME BEFORE INCOME TAXES (5,322 ) 540 (8,069 ) 488
Expense for income taxes 5,751 193 4,460 174
NET (LOSS) INCOME \\$ (11,073 ) \\$ 347 \\$ (12,529 ) \\$ 314
Net (Loss) Income per Share:
Basic \\$ (0.69 ) \\$ 0.02 \\$ (0.78 ) \\$ 0.02
Diluted \\$ (0.69 ) \\$ 0.02 \\$ (0.78 ) \\$ 0.02
Weighted Average Shares:
Basic 15,979 18,257 16,149 18,284
Diluted 15,979 18,408 16,149 18,498
Cash dividend per share \\$ 0.05 \\$ 0.05 \\$ 0.10 \\$ 0.10
PCTEL, INC.
P&L INFORMATION BY SEGMENT (unaudited)
(in thousands)
Three Months Ended June 30, 2016 Six Months Ended June 30, 2016
Connected Connected
Solutions RF Solutions Corporate Total Solutions RF Solutions Corporate Total
REVENUES \\$ 15,781 \\$ 8,507 (\\$45 ) \\$ 24,243 \\$ 30,480 \\$ 14,942 (\\$105 ) \\$ 45,317
GROSS PROFIT 4,941 4,286 10 9,237 9,265 7,016 7 16,288
OPERATING (LOSS) INCOME \\$ 1,792 (\\$4,372 ) (\\$2,750 ) (\\$5,330 ) \\$ 3,099 (\\$5,901 ) (\\$5,281 ) (\\$8,083 )
Three Months Ended June 30, 2015 Six Months Ended June 30, 2015
Connected Connected
Solutions RF 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 3,931 1 9,349 10,861 8,647 11 19,519
OPERATING (LOSS) INCOME \\$ 1,498 (\\$347 ) (\\$2,816 ) (\\$1,665 ) \\$ 3,187 \\$ 786 (\\$5,734 ) (\\$1,761 )

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,

2016

2015

2016

2015

Operating Loss (\\$5,330 ) (\\$1,665 ) (\\$8,083 ) (\\$1,761 )
(a) Add:
Amortization of intangible assets
-Cost of revenues 167 242 333 261
-Operating expenses 577 943 1,180 1,578
Impairment of intangible assets 4,724 0 4,724 0
Restructuring:
-Cost of revenues 0 114 0 114
-Operating expenses 24 440 541 440
TelWorx investigation:
-General & Administrative (1 ) 54 5 91
Stock Compensation:
-Cost of revenues 133 56 264 129
-Engineering 175 30 342 145
-Sales & Marketing 183 (18 ) 328 140
-General & Administrative 893 173 1,309 328
6,875 2,034 9,026 3,226
Non-GAAP Operating Income \\$ 1,545 \\$ 369 \\$ 943 \\$ 1,465
% of revenue 6.4 % 1.3 % 2.1 % 2.7 %

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

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

2016

2015

2016

2015

Net Loss (Income) (\\$11,073 ) \\$ 347 (\\$12,529 ) \\$ 314
Adjustments:
(a) Non-GAAP adjustment to operating (loss) income 6,875 2,034 9,026 3,226
(b) Other income related to SEC investigation of TelWorx 1 (54 ) (5 ) (90 )
(b) Legal Settlement - Amendment to Nexgen APA 0 (2,160 ) 0 (2,160 )
(b) Income Taxes 5,471 128 4,289 (90 )
12,347 (52 ) 13,310 886
Non-GAAP Net Income \\$ 1,274 \\$ 295 \\$ 781 \\$ 1,200
Non-GAAP Earning per Share:
Basic \\$ 0.08 \\$ 0.02 \\$ 0.05 \\$ 0.07
Diluted \\$ 0.08 \\$ 0.02 \\$ 0.05 \\$ 0.06
Weighed Average Shares:
Basic 15,979 18,257 16,149 18,284
Diluted 15,979 18,408 16,312 18,498

This schedule reconciles the Company's GAAP operating loss and GAAP net loss to its non-GAAP operating (loss) income and non-GAAP net (loss) 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, 2016 Six Months Ended June 30, 2016
Connected RF Connected RF
Solutions Solutions Corporate Total Solutions Solutions Corporate Total
Operating (Loss) Income \\$ 1,792 (\\$4,372 ) (\\$2,750 ) (\\$5,330 ) \\$ 3,099 (\\$5,901 ) (\\$5,281 ) (\\$8,083 )
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 0 333 0 333
-Operating expenses 44 533 0 577 114 1,066 0 1,180
Impairment of intangible assets 0 4,724 0 4,724 0 4,724 0 4,724
Restructuring expenses 0 7 17 24 44 424 73 541
TelWorx investigation:
-General & Administrative 0 0 (1 ) (1 ) 0 0 5 5
Stock Compensation:
-Cost of revenues 43 90 0 133 84 180 0 264
-Engineering 30 145 0 175 72 270 0 342
-Sales & Marketing 113 70 0 183 200 128 0 328
-General & Administrative 52 96 745 893 92 168 1,049 1,309
282 5,832 761 6,875 606 7,293 1,127 9,026
Non-GAAP Operating (Loss) Income \\$ 2,074 \\$ 1,460 (\\$1,989 ) \\$ 1,545 \\$ 3,705 \\$ 1,392 (\\$4,154 ) \\$ 943
Three Months Ended June 30, 2015 Six Months Ended June 30, 2015
Connected RF Connected RF
Solutions Solutions Corporate

Total

Solutions Solutions Corporate Total
Operating (Loss) Income \\$ 1,498 (\\$347 ) (\\$2,816 ) (\\$1,665 ) \\$ 3,187 \\$ 786 (\\$5,734 ) (\\$1,761 )
Add:
Amortization of intangible assets:
-Cost of revenues 20 222 0 242 39 222 0 261
-Operating expenses 230 713 0 943 460 1,118 0 1,578
Restructuring expenses
-Cost of revenues 114 0 0 114 114 0 0 114
-Restructuring charges 426 14 0 440 426 14 0 440
TelWorx investigation:
-General & Administrative 0 0 54 54 0 0 91 91
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
729 1,022 283 2,034 1,188 1,608 430 3,226
Non-GAAP Operating (Loss) Income \\$ 2,227 \\$ 675 (\\$2,533 ) \\$ 369 \\$ 4,375 \\$ 2,394 (\\$5,304 ) \\$ 1,465

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