PCTI - Earnings call transcript Q2 2019

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Operator

Welcome to the PCTEL Second Quarter 2019 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to Kevin McGowan, the company’s CFO.

Kevin McGowan

Thank you for joining us on today’s conference call to discuss PCTEL’s Second Quarter 2019 Financial Results. With me today is David Neumann, the company’s CEO.

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

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

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

David Neumann

Thank you, Kevin.

quarter sequential strong another with driven antenna pleased revenue margin by We’re improvements. in

Second last investments gross improved in compared to quarters R&D per attributed and earnings we both actions demand results sequentially EBITDA and share to adjusted quarter are and industrial XXXX, receivers profit IoT The the last a increased all improved the over three XG revenue, took strong for and year. non-GAAP margin, scanning antenna sales.

our the second for results quarter a issued announcing XX, the release press XXXX. June closed We market after ended

to million. non-GAAP are our margins XXXX, $XX.X For of for contributed revenues quarter improved sales share the earnings receivers improved the gross higher-margin second Increased for antennas per quarter. scanning and

first and year. and gross per share X.X% up earnings X.X% the margins over in quarter up last $X.XX second achieved non-GAAP We over of XX.X%, quarter the for

contributed IoT, antenna to transportation solutions significantly XG focus coupled increased receivers, scanning for industrial intelligent Our strong for margins quarter. demand on the for with the and higher-margin

XXXX. level margins to this through expect We maintain at

to of with the more have XX U.S., planned Europe support launched Asia, the remainder to XG over XXXX. ultimately, XG wireless the demanding will capacity, network technically than in construction We several and and dozens continue Operators address years more more applications. believe for networks next

receiver XG Our almost a testing ago, technology, which XG as as R&D leader investment vision the years networks. in PCTEL in X scanning started

We demand increase accelerate second and the a will revenues receiver and U.S. from continued pending than believe upgrades. between rollout their test in products. dominant from position and the of for in the receiver was the merger and sales our T-Mobile quarter XG our demand benefited for tools. measurement our hold and Scanning More for scanning units new XG XX% revenue Sprint XG

In network XG will addition, opportunities. additional also provide

supports expanded X full that XG We and XG in XG portfolio MIMO the scanner our fastest the receiver MXflex. XG market, scanning only on concurrently. that unit MXflex the adding networks by only second the and the The quarter is to receiver support our scanning in scanner XG XxX measures

provides a receivers, reduces In measurements. revenue have for XG to and units the PCTEL. higher addition upgrade MXflex for an XG margin option cost support purchase it to purchasing add to new to existing Upgrading the scanning their testing units stream customers

includes of an testing continue we public networks expanded and important The to providing public PXX responders. test has version to make LTE remains in market safety to in-building been quality PCTEL. safety our robust, for testing and Public FirstNet capabilities for always safety signal tenants and demand latest The first include progress our measurements. for solutions solution

in-building performance-critical believe growing feature safety this have that solution product nationwide to scanning to for that best is pleased market our safety provider dealer major antennas communications public is their agreed we verify in network. the receivers system are a for catalog, which has our solutions first responders. public distributed a and We and radio to We

precision require technologies, wireless to multiple by enabled interference to hostile RF provide engineering environments. limit RF and gain Systems, in Transportation Intelligent

City, urban reflecting be York systems in intersections customized challenging New XX,XXX will deployed and Our approximately signals canyons at RF can environment. traffic where antenna create a

accounted antenna begin will in quarter. some gives going this Antenna in visibility second incoming of orders This quarter which opportunity deliveries continue for a our the portion of us antenna the for and XXXX, significant order third forward. into revenue

order RF for as for GPS requirements such for important, is meet tracking to aircraft. be used antennas and an custom as mechanical for just We military environments, helicopters. and in to and commercial aerial vehicles performance is recently in physical for as as Fit engineering cases, many demanding received important Form antenna aviation well specialized

respect revenue, remained agriculture, is for IoT in specifically systems radio market and the devices largest antenna the rail With for revenue opportunity second antennas, strong. The industrial precision fleets, PCTEL. long-term industrial to quarter and for

high-power design used PCTEL products for in significant significant sensor wireless then is tracking. antenna. manufacture device, order provide Our are in and smart the entire to the sensor today the Internet systems because lines. quarter grids, and access This monitors We just utility asset IoT a won support new to a that sensor will networks not second

radio second additional launch half industrial XXXX. the to IoT products expect in of We

supporting product toward original These of becoming radio, leading our releases will design long-term a include IoT customized manufacturer, antennas that of or step be devices systems. goal industrial and ODM, another

talk to to like a spend I’d about few China. moments

issued quarter our within however, executive that note, order I customers for support by up was XX% the to of U.S. second the this to second and the XXXX, in products we and in government. China constraints States, generated deliver revenue from quarter United of the of trend XX% the expect continue We our continue.

attractive antenna the Although U.S., our remains our manufacturing for is base products. in customer mainly China

We our late transition contract complete flexibility substantial geopolitical reduce company’s in entire in XX% order to are the and manufacturing portion manufacturers a is exposure. in of to China workforce. reduction an the of be to result This in increase XXXX substantially transitioning and estimated activities expected process in in

in business. XXXX. improved second I’m and quarter sales demand and for forward, our and tools, size marketing of products XG test through believe continue increased by we orders incoming driven engineered with the momentum win pleased Looking global efforts the the and and measurement incoming on to will the rate orders high-quality Based

provides incoming business for some entering scanner orders products cycle quarters projects. quarter significant. future for larger antenna reminder, scanning the backlog for so is revenue shorter a third As much is with receiver normally The visibility

Kevin with now increase Kevin? our look processes improved results, third have to confident a is and I at call drive that, This will value. turn our and over I’m place quarter second in to With people closer sequential that consistent we growth the quarter. to for the shareholder

Kevin McGowan

Thank second guidance. provide June I will XXXX, you, address ended and the financial for results David. quarter quarter XXXX I will the third

quarter, in the X% compared the this second revenue the second line. quarter year. test Revenues the to lower second of highest the quarter for first to revenues quarter quarter, in $X.X XXXX. higher Similar quarter measurement of second antenna compared second were in up the revenues last and Test $XX.X product million measurement offset to ever and revenues product million XXXX, were

As but of of the measurement to second $XX David and second mentioned, revenues of compared were scanning second line X% were drive Antenna in XXXX, products XX% sequentially. higher receivers top revenues for compared X% quarter the test to XG XXXX, product and quarter the quarter higher as for the higher to XXXX sequentially. continue of the were lower second million quarter in XXXX XX%

and and applications nonrecurring lower to quarter the last we antennas to fleet but year revenues declined Second due small compared were of completed WiFi second project revenues public for cell a higher for in quarter enterprise safety because for antennas large XXXX.

and better percentage of the gross second and test the margin products due product margin XX.X% quarter due XXXX in reduction a XXXX gross to also X% by because antenna the of margin favorable line for compared the improved cost was The actions year improved more and profit prior measurement taken line second The mix antenna to mix the profitable gross quarter product X.X% to within products in XXXX. percentage. of to primarily

in both the first in XXXX. of Non-GAAP of Adjusted second and quarter $X.XX of first to second to non-GAAP to and of compared share the diluted was of higher in XXXX margins. breakeven revenue XXXX. in X% second XX% of EBITDA the and for to earnings gross earnings quarter and a $X.XX Adjusted improved quarter as margin primarily the compared because the share per second percentage XXXX quarter quarter per improved revenues year in EBITDA X% and the quarter last compared sequentially

Cash end during million the to the and quarter at XXXX, of of $XX.X $X.X XXXX. as free by million million investments quarter increased $X.X second of flow was the cash second

the quarter to guidance. turn let’s Now XXXX third

$X.XX. higher $XX share and be be million revenues We with margin million, Gross is antenna range range $XX $X.XX projected XX%, of expect in earnings and to to percentage third the product the to sequential of non-GAAP XX% is in revenues. be to the will per projected between quarter

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

David Neumann

Thank Kevin. you,

the in first performance of our with half XXXX. pleased We’re

and in will and industrial and winning reduce XXXX to business the Midwest and two opportunities. August. conference Minneapolis the IoT a XX. driving meeting the benefits for success both our in on seeing Kevin We’re to I’m basis for R&D new the healthy conference XX costs, on XG in Investor in have in We scanning actions realign August and they products be investors the we of Investment daily executing had talent of necessary developing the maintain I August conferences Intellisite on Most that proud importantly, Chicago investment. IDEAS attending at and with look forward team a changes, took

and With Operator? I that, are available answer questions. Kevin to

Operator

Lake comes Jaeson [Operator line of from from first Street. Instructions] Schmidt Our the question

Your line is open.

Jaeson Schmidt

enterprise you and Just Wi-Fi the traction seeing could in the on curious momentum comment market. if you’re

David Neumann

Enterprise WiFi generator recently. strong a hasn’t been revenue

designs we antenna – have that had now. have We are work several in

point. So but hasn’t we’re to it anticipating generator a this some huge more been opportunities,

Jaeson Schmidt

you us, the the in Okay. scanning XG, this continued half sort business? elevated XXXX? the through ramp, And levels then Should continue saw receiver can we the case, the cadence in remind and expect the XG – but of of, of these what – you first from

David Neumann

a good question, that’s Jason. Yes,

of XG. time, within it through initial XG, been then ramp already, XG, is number So But now And years. XX off. these and to deployments. cycles a we’ve typically, level technology to X And that there’s new tends XG a

example, So historically, using around the to once million goes we’ve that it receiver what scanning sometimes then $XX a to the peak, revenue range. XX through seen mode $XX back maintenance XG million as mark. as million in And – you’re $XX we the an refer to

extent, with XG some and a increase a companies haven’t how they ways things with need closely see link we there’s to as efficiencies, past I pretty to one we’re industrial we had to And have items, differences plays be linked is more of IoT are to is And going think XG. drive capacity. going there’s XG link couple applications. the this in to can have think driver, to – the I out. a for that But of going in find

you read bit anticipated. across the if think rollout’s more than XG I aggressive the some of been on, a the early So reports industry, anyone’s

So were we’ve measurement helped been the enjoyed of providing also a we been of able X months so it’s It’s for probably portion about market. a equipment strong. ahead test we’ve significant capture for that, product competition to XG and the very that

the is of of that of is bump this far. And we the one think at questions deployed deployments the I number just are ramp? don’t by get, peak Now a markets a that we’re thus this or at looking

and the yet. think rolled operators short a aren’t increase with deploy mind, the capacity out want capacity hotspots. issue that term, there’s in But serve still features additional in keep XG, XG So where really it’s I to to

the And in out. have So as which capabilities rolled have well. aren’t low you then you releases machine-type are also a latency, later massive that communications,

opinion going more of then So be to test good devices the test will XXXX, ramp. But antennas for there’s the XG opportunity and going be this and for applications, year. least for start and and a to it my also a I measurement And IoT that XXXX good is that later IoT starts a this to to a equipment support then to at opportunity roll industrial test most equipment. through will feel industrial We be need personal it’s into out the portion. capacity that, of measurement is – going once

Jaeson Schmidt

should comments, mix? the to those this given just expect given remain just gross margin finally, range, mid-XX% And we helpful. That’s Okay. in

David Neumann

Obviously, But of in year, the guided we’re it. do provided consistent haven’t that. the We mix. what QX really and any seeing we that guidance for same we remainder of beyond kind

Jaeson Schmidt

Okay. Thanks a lot guys.

David Neumann

Jaeson. Thanks,

Operator

from from Henry David next of Wright the comes question Our Investment. line

open. is line Your

David Wright

geographically? Hi, to good your you are afternoon. manufacturing Where China moving

David Neumann

entire antennas. we higher-margin, China almost China lower-runner for a that a one it’s location, do year the still intend of we’re PCTEL And ago. So to core this started to in keep group fact, the we at moving process not the manufacturing manufacturing facility in

evaluating antenna. we’re others. selected For where most high-runner a manufacturers But with the the right likely, of depending to the on we’ve go group specialty, products a few, we’ll contract

As an factory of in to doing antennas. capital public from the that of amount much if need safety embedded antennas, you you’re different example, a invest is producing type

all several we’re CMs. So be evaluating it’s out CM, factory of a not also that China of a the to of mix factory we’re plus moving one it our The in manufacturing are PCTEL China. CMs and that will out

David Wright

America? China, Right. North Asia? Is out of

David Neumann

I it’s comments on so sense manufacturing close really supply that. out that just the the those think keep supply keep of to is along early But chain for to technology to mind make in make Asia coming most lines, it does of chain.

David Wright

and is you around why Okay. administrative give some commentary general can And expense up?

Kevin McGowan

that enjoyed EBITDA from Sequentially, and revenues business. measurement test the because the of we’ve CSD and

during compensation have We the of year. increased variable our some

David Wright

to mostly it’s So compensation? related

Kevin McGowan

Correct.

David Wright

Okay. Thanks much. very

Kevin McGowan

You’re welcome.

Operator

the from Wiesenberger line Marc question comes Riley. Our of from B. next

open. Your line is

Marc Wiesenberger

Good you. maybe team could to if on that for win IoT-related factor played and of you on the the a a wondering more development your a redefined And cadence monitoring afternoon. those comment then lines clarification your revenues? I’m in bit Thank power business little how win?

David Neumann

Yes.

So smart utilities. same to what’s grid did related IoT the second win, system too important is this that we think note is I the to for the for customer. industrial And

We So sensor, the to this bid this antenna. a a from success the relationship, devices, develop on the one product of antenna we of for Because specifically prototypes. were and also development management on of say mix efforts of the that LEDs was business would but first included lot team including of line and the support and other I system monitor infrared type unit. work our just to to next and asked engineering the worked

what think were opportunity, configuration, antenna able we as the came the were of were detail, side, we on lot which specific was just mechanical did engineering expertise we one, elements. in develop but a additional I there because gives, And the delivered job good a issues. space. RF – we we this more because, We question? it of a for most with be great And we a the really those had can’t going unique good there quarter. industrial – very – won second good sorry, I’m visibility gives it’s was little of in us bit – the so important to all result, keeps importantly, a But into the And it a as solving not which order go us part team us IoT our position challenges a win your Marc, in one to

Marc Wiesenberger

we of the those expect? Just cadence revenues should

David Neumann

industrial definitely good antenna focus. of So we putting business, is lot had IoT The important, some our we’re a opportunities. have and

the York. in other We’ve the have New one markets. developed that We in are solutions

radio can of release I radio think we address opportunities the a which components when transmission to whether to a also only provide in becomes supplying then go or have RF really we’re new devices products, can that where is this will solution, we sensors. the the the IoT interesting that sensors where start device or monitor be second we the half actual into but year the antenna our not that because this mechanicals be

and a So segment this of opportunities, long like component that industrial we’ll it’s grow market is focus And in term, the overall as to definitely see revenue. is of I’d those. definitely largest IoT focus. to terms a on – revenue portion definitely continue

Marc Wiesenberger

great. That’s

specific one. Just a follow-up on that

with everything that you you’re any release you’ll at there? be that – this your some all mentioned causing do product facilities, or line. anticipate You are entire that manufacturing comfortable with be of you product Since to realigning going the manufacturing delays

David Neumann

don’t anticipate any And No. delays. we

decisions almost from end we’ll – need transition ready. isn’t the those lot – the approval at this it’s manufacturing, transition changes. do It’s you a the a that planning And going And think make we something to CM there’s XXXX. through in overnight. we If to approval we products some for into the chosen, of this. once of goes customer the lot need cases, why CM’s the that go this cases, from make look you is of In all is once to

controlled approach So it’s a transition. very to the and methodical

So anticipating any of any or that we’re delivery well. or products for product as issues issues product not other for the

Kevin McGowan

we that relationships we’re manufacturers going business also to that do help with since increase transfer some Marc, And already contract will business and our with of transition. have to, the

Marc Wiesenberger

Understood.

Additionally, are you dynamics OEMs? changes the any going seeing in after when the X competitive some of you’re Tier

David Neumann

For about? talking business the measurement business? you test are and What

Marc Wiesenberger

Maybe some points. of access the Wi-Fi

David Neumann

of set there’s that I – mean, change lot. doesn’t always – There’s a they a competitors don’t

forth. wins and And one the we’ll to next back bid, comes the win, sometimes bid next then one company company

landscape the So like, don’t know if changed. has I

I it’s deals. to to win think it’s us up the group and the same really

Marc Wiesenberger

Okay. the demand has traffic New win York cities? And signals, helped from in that spur on based other to your additional significant connect some maybe all

David Neumann

hope. the That’s

we’re lot this with U.S. cities that want are easy antenna. trying The into vendors other overconfident, system want get replicate of copy. but work yes, a put So antenna vendors a – working don’t to we two replicate PCTEL couple to system to antenna this this, in be decide is that use the We to to in both not and the

we’re that. – So we’re and fully supporting

Marc Wiesenberger

good. Very

their projects, macro about of customers? your of customers product pushing larger out their of factors. may some have some your their maybe of the some Are – on Some internal seeing based or – timing you larger talked be anything competitors of either across

David Neumann

Not of, I’m no. aware that

Marc Wiesenberger

Great. That’s it me. from very Okay. Thank much. you

David Neumann

Mark. Thanks,

Operator

Chain the Lakes question comes Tim next from The line of Instructions] O’Connell, Investment. [Operator of

open. line Your is

Tim O'Connell

good the quarter. on Congratulations

and cell there your First like positioning? business comment or question is looks small around and what maybe the antennas

David Neumann

Yes.

geopolitical the situation. cell, have So challenges our in largest knows, I think customers everyone with small some definitely China

the supporting still terms that We’re the customer order. of executive for

we we’re everything that customer, can. important doing So

we cell the have antennas, specific component with only is that there small one of can a though the is even One provide of antenna system. larger we opportunity the challenges that

So they has slowdown can’t a customer get a that necessarily been all bit there components our of because need. the

factor. definitely that’s a So

some cells a other Now small the – with That supply the we of small designs. new goes business to also cycle through large cell business OEMs. typically

bid continue on team year of together small really area some we designs. So cells. And other development of on last we’ve designs those large our we some focus put that business the asked for to is win and new OEMs one to this those where

to market and that’s know especially we – time to But get XG take away, is going not the So qualified cell business. in, for opportunity some the small going really on to to an that have get bid networks.

XG wave. the millimeter important. of on it than cell bit Some especially side, different approach with small some The – a It’s small cells a little antenna. are

– We that our work there recently. continue in that But China, customers largest a based been in given challenge one to area. of it’s is

Tim O'Connell

to then just of there some any the in last And the comments at response – helpful. question terms I in in creating that? shareholder that call That’s Okay. value? you sheet, a in balance referenced looking you’re you’ve know of terms

David Neumann

Yes.

talked look continue I So And every this yesterday. looks in we to at Board before, just it. allocation meeting meeting. capital our Board a had at think Board We about we’ve

looking can most in Europe industrial our we be distribution went the sold business, manufacture investor this U.S., then you us business – ways are And those There’s So best the to talked in that distribution a through that in the especially at conferences. space process antennas reason calls, acquisitions also IoT in believe we other in do of have again, help if about use the lot that antennas grow in opportunities and We right of would to the no we’ve channels. here the our other there in in cash. Europe.

to in to looking portfolio ways antenna Europe at expand industrial IoT. in through an opportunities we’re acquisitions at looking expand through our So acquisition,

all at time. an looked at – active companies So we we campaign. We have the look

is We about It’s commitment So plan what made well. that dividends but stock we’ve to Board share we at the really is radar. calls on allocation this up active publicly that are Board definitely the the make capital buybacks our and would discussions, those year. the talked there and as meeting to

So and of end share we had we before discussions the will yesterday, year. additional that the

Tim O'Connell

from all That’s Thanks. me. right. All Okay.

David Neumann

you, Thank Tim.

Operator

like are Kevin to McGowan. to turn questions the no back this would at time. call There now I

Kevin McGowan

you. Thank

with see receiver to the Tim And pleasure for look pleased said We’re and and we’re It’s – to to with hard to scanning second before in dedication XXXX, the PCTEL as finishing work. thank their strong. I’d products, really the date in best-in-class antennas, markets. a win I’ve team the we half like results the team forward right the entire that just

I’m We’re work pleased all developing comes the right It the is for products. stakeholders. down that see execution, and to to off paying hard

So everyone, with that, afternoon. great like and thank a have to I’d

Operator

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

may You all disconnect.

PC Tel (PCTI) 9 Aug 192019 Q2 Earnings call transcript