PCTI - Earnings call transcript Q1 2019

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Operator

Welcome to the PCTEL First Quarter 2019 Earnings Release Conference Call. At this time, all participants are in a listen-ony mode. At the conclusion of our prepared remarks, we wilkl conduct a question-and-answer session.

As a reminder, this conference is being recorded. I will now turn the call over to Kevin McGowan, company's CFO.

Kevin McGowan

us XXXX conference financial joining PCTEL's to for quarter first results. you on call today's discuss Thank With me today is David Neumann, the company's CEO.

let statements. begin, may we me that you Before this contain forward-looking remind call

discussed current While statements results cause risks uncertainties projections. materially could these that PCTEL's Risk differ our in are issued materially recent actual the press to projections differ to these reflect Form best actual and was results in forward-looking from release, cause which on from on today, report subject are and of are judgment, most PCTEL's factors its to they annual which both forward-looking our earnings could XX-K, available website. that

measures to EBITDA. the With commentary press the issued measures reference that to non-GAAP measures was will our non-GAAP over my non-GAAP these facilitate to following included now comparability our GAAP earnings of quarterly earnings David in Neumann. periods. release over to it's include of believe pleasure and reconciliation today. We A full results our earlier these is measures: that, Additionally, adjusted different call turn non-GAAP per share

David Neumann

Thank momentum we XXXX. and you, with the I'm coming into Kevin. results maintained pleased our

adjusted he'll provide results ended market QX. quarter will and improved scanning margin, overview to antennas profit non-GAAP gross share in and Kevin the for XXXX. in for discuss detail, our guidance products. XX, our first then and issued results March the receiver our release a financial We all announcing opportunities of quarter close First year. I'll after per press more market three both for segments earnings compared and an sequentially EBITDA last provide recently redefined

$XX.X quarter per reduction antennas we XX%, share receivers and contributed XXXX, XXXX the gross the X.X% over took actions and strategic for to sales We quarter realignment and The first earnings scanning share of fourth margins non-GAAP the achieved million. the up over margins higher-margin last $X.XX non-GAAP year. improved our earnings increased in per gross improved revenues quarter. the for of up and quarter X.X% in are For for first cost

over project-driven. deployments Our and our XG expectations, didn't the more has in considerably in improved scanning receiver And infrastructure business business we segments. driven U.S., believe has quarter antenna although the long-term of is Europe first meet strong by growth targeted this Asia. business XXXX, market The early prospects

and IoT last in to we As in our and IoT call, RF and fleet, the leverage these three We long-term created we defined segments: and business We define safety public enterprise safety and to our enterprise into enterprise enterprise and address an XG/XG, wireless, automation markets: segment product industrial to We is into smart intelligent four industrial industrial WiFi, combined cities discussed markets wireless recently XG/XG IoT. wireless include market public IoT. transportation our transportation WiFi, segment. solutions. strategy industrial our expertise intelligent industrial fleet to and redefined wireless networks Historically, enable we applications. in-building four

used detail. in each in our safety. RF and public wireless three enterprise a PCTEL look of are the take of at cellular market, more products markets Let's WiFi, types networks: defined In

point quarter. For provide antenna the external embedded project our WiFi WiFi manufacture a industrial applications, we antenna significant embedded antennas the ruggedized to WiFi systems two design radio solutions. and largest and and access in won We first and of we OEMs,

require XG to scanning application Public both two within are of antenna the and demand our are the is year. To systems of antennas receivers markets, fire and provide become We multimode and provider infrastructure PCTEL both for remained used responders cellular area as believe some our FirstNet, of equipment position public sub-X vehicular available in networks XXXX. and wave public this and public scanning test the receiver the systems most gigahertz enterprise quarter and our market. through in this single our market. U.S. providers buildings. is GNSS government the in receivers networks We first LMR strong hold can XXXX handsets scanning believe safety testing to as small growth our during challenging later used environments the for bands PXX will solutions wireless to into communicate cell large expand from the fourth police We test the Sales for test broadband across emergency a safety, for verify leading quarter third XG a XXXX and regulations by largest critical of vehicles. building For ensure receiver spectrum legacy continue safety first antennas RF and is scanning leading communications. millimeter to of emergencies.

a market holistic highways. and transportation for Our transportation view roadways connected Smart industrial intelligent our second transportation, defined is provide roadways and focuses of on congestion systems which applications. smart fleet to improve reduce and safety, to

recently high-performance a include PCTEL to provide our intelligent environmental antennas example, antenna applications. an train rail construction in and for precision public transportation engineered operate and requires passenger fleet that maximize conditions. LTE agriculture, for interference are city major to to demanding Typical gain, in won and solutions applications security systems cellular Smart at vehicular network. another guidance within fleet via us autonomous operations. is access, antennas systems With control for ruggedized signals mining wireless traffic all minimize intelligent respect segment the to and As applications, wireless link U.S. bid a key

monitoring, low-profile multi-band the This radio potential factory and Our segment this also market software industrial we average product such industrial create or hardware, additional asset our organically IoT through systems. antenna to which attractive automation, gross whether industrial revenue include customized smart expanding market tracking Yagi devices, devices, IoT and include includes machine-to-machine, market By selling applications and and with provide capabilities acquisitions, Product includes third defined MXM, omnidirectional margins. prices IoT through is and communications. as or embedded antennas. remote utility grids,

in for public to sub-X safety our Looking same and for momentum both Europe use ahead, where hardware we XG scanners our and scanners building wave the millimeter networks. We're networks that our PXX strength –with scanning testing, Asia. with we LTE gigahertz utilize for we America, North in continue see

in also industrial have design transportation public remain We us markets where the in of before, small three in Our the within mentioned major IoT supply we wireless key our safety area sales intelligent half. antenna as we growth the two wins OEMs. strong. enterprise long-term and anticipate second for sales is a And

design had Although slow this us antenna start on small cell year, sales focusing are for longer-term wins. a we

reductions contract manufacturers. we addressing leveraging the discussed, in previously driving China challenges are our As cost market through and

substantially increase our be XXXX. PCTEL's will will first transition closer high-quality our look quarter. I positions for manufacturing With completed that, expertise in the selected Kevin? Kevin over growth to at and for a established technical our late products, now engineered turn drive shareholders. value segments expect in to market our We and call

Kevin McGowan

was you, revenue results this quarter million Thank by the test portion for receivers, the XXXX. in for and revenues compared the were to guidance. Test address to down Driven XX% quarter XXXX. $XX.X lower David. measurement the sales and product million quarter line and XX% products in were were first compared will lower to Revenues quarter, for I will year. higher scanning measurement quarter million highest in first A at quarter completed revenues test XXXX provide $X.X first quarter the million the strong of In $X.X a to first the our Antenna first XXXX. from of quarter, first offset product project end the the first were measurement quarter XXXX. and that of compared quarter the revenues quarter, first second the of WiFi revenues first financial since XXXX, last compared in ended antenna quarter the decrease resulted quarter, revenues XG product this XXXX first second higher XXXX. enterprise I March $XX.X the X%

first The actions profit line the reduction as as XXXX benefits XX% to XXXX. margin quarter from product cost in well taken improved mix favorable due to gross

ratio fourth the Adjusted quarter higher fourth in in products to quarter EBITDA first to better XXXX. quarter the due a profitable within XXXX first earnings for in compared $X.XX and to quarterly improved revenue mix in XXXX higher-margin because first to million to the more the a but for non-GAAP higher year margin percentage last Non-GAAP due was expenses. and line of gross of expenditures percentage per of withholding lower dividend, the the and taken margin XXXX test gross share quarter X.X% quarter XXXX the X.X% product gross earnings a as end as Adjusted The prior the compared margin and investments and compared were first and first the primarily due quarter antenna in improved to first The to compared quarter profit payments of improvement capital $XX and because margins stock-based and gross $X.XX actions the in essentially the X% reduction sequentially per revenues from cost the flat both EBITDA for quarter margin cash in antenna as to to higher tax year, an was at was measurement of for X% quarter the funded products. quarter the XXXX. first XXXX and operations compared and negative $X.XX also X% Cash of compensation. in the first share XXXX. operating

turn to quarter second let's Now guidance. XXXX

be earnings from We $X.XX. sequential be and expect million projected will share lines. forecasted revenues non-GAAP quarter between percentage between per to gross with is $XX is be both second and and $X.XX projected the XX% product to revenues higher XX%, between margin $XX and million The

call to like we would to closing I David questions, Before make over to a remarks. few the turn take

David Neumann

solid uptake to and another PCTEL these and PCTEL's improved that value our XG/XG opportunities industrial markets. WiFi is wireless, enterprise transportation Kevin. well for increase capabilities IoT provide and industrial We're on to serve drive networks focus you, of earnings. positioned pleased in Thank shareholders. will and confident the will We're with intelligent advancements have IoT markets growth quarter The and

XX Kevin attending on B. will and I mentioned, be Beverly previously Hills. Investor the Conference As Riley May in

on be meeting available Coast Operator? forward I attending investors Kevin IDEAS Investor with conferences. Conference also that, With and We questions. answer XX are June in to will at to look the We Boston. East these

Operator

Riley. Our line from [Operator of Mike B. Instructions] question Crawford comes first from the

line Your open. is

Mike Crawford

mix revenues nice Thanks. does measurement and to It's test a line. what bottom the amazing,

still begun for sequentially as down in projects something deployments? that from could the is on demand see of you pace in various Or your it on and here? XG depending do markets scanning With receivers, up that waves be growing driving

David Neumann

question. good a that's Mike,

So make robust, be to the there pretty strong. deployed look historically stations the scanning for XXX,XXX and you demand rollouts, already will argument are far, at for has base XG. continue if it And the receivers to been that about

remainder of should be year, the through do least we this that So business. believe, at a solid it

The be communications. initial That's to machine-type really second out going provide really other of the are areas drivers coverage latency probably enhanced will in is most – that drive handsets until uptake in really not – or the mobile or more Longer-term, applications massive half will dense scanner come XXXX. help The take the probably factor going are ultra-low and out broadband. come sales to really in XXXX. are start to the to and driving increase XXXX to come into going handsets

or scanning So then for I the IoT are latency fast comes machine-type think it receivers short-term quarters, and the how couple in next driving But to fine. applications. need should the applications be the down for the

Mike Crawford

I think regarding some provide And hunting is business, this industrial development have and of company, you team which Okay. that up could going – business an markets top the out for incremental really Things mostly new Internet growth. then line new

that with Or that? characterize you would effort? success seeing you are how So

David Neumann

Yes.

a So traffic major win we in just signals. a U.S. call that city connect we all mentioned the in to won relatively significant the

running announced, a not second antenna purpose. but couple because business Our the with of the that, specific good you the IoT was so networks. able only experience That others on a year. space LTE the antenna need in that course, is mentioned have to the win. us, close manufacture And and to with the component we to be probably expertise this the the antenna, he of of RF for environment and mechanical strong is also very one, being performance, the enclosures a the half we are dealing for ruggedized

before, that for these then addition and talked some Akron, specifically designed in of new the to are that antennas. commodity we've application. Ohio. team So this developing in They're out products that, And about not we're radio-type

and going complete, are IoT systems card actually the from put the the So as released we'll once later those radio able to year, this radio be well. antenna together to ruggedized turnkey more interface

Mike Crawford

And Okay. Great. question. then final one just

will – of and in be how Given XG you in market? your your, assess that what deployment guess, much would the risks opportunities I China, global and global is business

David Neumann

and on there's negotiations China is risk going trade a real this week.

as that's as there, a business an still we're company. As disadvantage long American at doing out in hanging China

have U.S. how some in It's rolling don't risk, go are of risk that the could the short-term these in operators XG. issues here, You probably complicate XX% all out think most in have dominant position is mind, hold And China, itself that a the see it's U.S. done trade and that. a – we've significant. to in a well but to business we operators of Historically, wait keep to sales though, are in of our We're four given negotiations going the but with China. aggressive real fairly and how I

Mike Crawford

thank Great, you. Okay.

David Neumann

Mike. Thanks,

Operator

comes of Lake question next the Jaeson from line Schmidt from Our Street.

is Your line open.

Jaeson Schmidt

questions. Thanks for my guys. taking Hey,

Just how antenna the product that If transport segment about year, think the growth enterprise IoT. wireless, could the and order should this drivers you segment? of you intelligent when rank the within industrial look we the for at curious, sort

David Neumann

they're line weakest small business, the working but we're enterprise the cells – anytime antenna come soon. not within For or larger antenna on larger would But wireless. to probably going the be bids,

enterprise WiFi is WiFi a for very a projects bit some cells challenge deploying enterprise or relatively have and for significant we of The wireless now. enterprise antennas. component project-oriented, So those is within wireless small

the IoT upside recent some it's and the have more Industrial in I later this wins gross most So given margin solid. probably profile. projected the of industrial also think we'll the wins year. And that IoT has that's space, attractive space

is agriculture, forward. margins mining probably vehicles most think the So are autonomous I the for signals – The we intelligent necessarily do, in transportation, gross but going improve traffic not applications. We're recent two maintain that there. will precision the for win help or this cars Those important in important. do

business. rank probably prospects. And second is lower a So growth is it's growth. think solid then probably enterprise I had IoT industrial a business solid the decent wireless growth. a order, transportation and best business is to but if probably the for I Intelligent And

Jaeson Schmidt

the looking the past some at market, the mentioned update Okay. Any And environment That's very sort helpful. you've antennas? in on pricing antenna of I know pricing pressure. within

David Neumann

IoT commodity China. reasons, with purpose-built more is the – antennas, we're significant efforts small not in focusing industrial because the that those more one complicated. space our Most of transportation cell pricing and pressure of and specifically It's a too, There's are product. intelligent more in solutions, more it's

margins we're So to those on able customized antennas. maintain better

Jaeson Schmidt

last Okay. QX. Obviously, the And the strong really and one jump margin queue. back in in I'll for gross me,

expected new the the Your guidance at of just XX.X% is QX, mix? level sort midpoint, you for for sort of given the this guys

Kevin McGowan

see again, an QX, based For measurement. definitely we little mean, improvement bit, and I a test QX percentage from on of higher

consistent see a for we of those out put currently but rest margins we – haven't We this guidance at the see the year, point.

Jaeson Schmidt

guys. a lot, Okay. Thanks

Kevin McGowan

Thanks, Jaeson.

Operator

O'Connell next Chain Investment [Operator Funds. line Lakes from the Tim of Our question of from comes Instructions]

Your line is open.

Tim O'Connell

Kevin. Hi, David; Hi,

Kevin McGowan

Tim. Hey,

David Neumann

Tim. Yes,

Tim O'Connell

So I that. going question – specifically situation first was on already China and tariff commented and you've my you've the Huawei on know around on Anything what's on already there? commented

David Neumann

globally. Huawei a receivers. customer customer Huawei very and both small is still important for very cell is a for scanning our the important business

globally – and good Although I very to majority XG. the us they're for have going in a put of they that's infrastructure the infrastructure banned XG in U.S., think position

dedicated We to know, have think serve of we Huawei have, based out Beijing. I as you a team

a ways, Our Chinese we're company accounts. those In viewed serving many manufacturing is in when as Tianjin.

good have We relationships.

more treat Huawei as from them geopolitical we'll perspective, our situation an customer. is things With a to and issues, But the continue important complicated. important, bit makes trade

Tim O'Connell

helping is When see business? the And XG then scanner XG really Okay. contributing cells. to you do obviously antenna

David Neumann

The Well, bands XG and gigahertz. has bands. two then millimeter wave main frequency the sub-X

networks. XG upgrading a change. the existing that's technology XG, lot for antenna doesn't of So And sub-X, the

antennas. for For is us XG, I some important area think other the of applications an embedded there's – in

we're designs embedded machine going applications, different IoT think type – embedded devices. as And XG supports a are of So the larger-scale antennas antennas and for doing as be more important. it in to of massive or the types more just

only that. want to safety. receivers also I good scanning then the we're the scanners we're think or that the seeing growth positioning some and comment antenna other So for And with contributing from I make for public XG,

state-by-state, so there's support sure LTE to county-by-county, PXX to responders networks to been our the the U.S.-wide, they're building where infrastructure work safe network, to adapt initiatives scanning are network, So the owners responders, first all We've LMR within need receiver. first their the – the that make that able building test emergencies. responding when to

radio, software-defined saving lot growth it's manually would in good well. of as We it's I the we're software it easier. do. these make forward of to to there going will take a factor think package, terribly it it's that that investment a package what XXx seeing not of with to continue buildings Given test hard put a and, And and some

Tim O'Connell

thanks. Great, Okay.

David Neumann

Thank you, Tim.

Operator

I [Operator this back questions to would now like Neumann. Instructions] are to no time. the There at call turn David

David Neumann

Okay. markets. we're like thank our this the growth from opportunity finish to them. working mentioned of I'd defined in QX XXXX advantage And Thank during markets the PCTEL We're The take that you. team call. to three to XXXX. which hard building we pleased in in in take momentum the We're right solid is

for have a thank products. execute proper the the to you, all to that I'd to the stakeholders. great We and alignment right opportunities the value confident have and we organization I'm on like and have afternoon. team build

Operator

this have conference. participation, your day. and for you gentlemen, and Thank today's a wonderful Ladies concludes

disconnect. You may all

PC Tel (PCTI) 11 May 192019 Q1 Earnings call transcript