PCTI - Earnings call transcript Q3 2019

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Operator

Welcome to the PCTEL Third Quarter 2019 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of prepared remarks, we’ll 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 third 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

EBITDA. commentary the these measures reference release to non-GAAP measures that was will over non-GAAP facilitate quarterly following comparability our earlier in of earnings to press periods. measures include is of believe and reconciliation We included A full our today. results these measures, Additionally, GAAP adjusted our different non-GAAP non-GAAP per issued share earnings

that, turn Neumann. now call over to David With pleasure the my to it's

David Neumann

us you, joining thank per sequential improvement. and earnings Welcome afternoon. We're strong and driven you revenue non-GAAP for with by Kevin. share quarter pleased Thank another this

applications. share adjusted scanning receivers our last and antenna Third non-GAAP quarter the wins compared XG for of IoT by demand consecutive all EBITDA increased solid and earnings quarter year. revenue, sequentially per fourth both makes and to This results for driven project

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

higher-margin Increased receivers contributed and gross margins X.X% XX.X% per strong achieved and in for non-GAAP for earnings quarter the improved for $XX.X scanning earnings over sales share gross the up were We quarter. third per of Our of $X.XX million. last year. to antennas revenues share margins non-GAAP

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

these maintain on supported part expect in tools. call, in budget mentioned last our margins As by through customers' we to measurement we spend and end-of-year XXXX test

can product we margins XXXX, to these comparable maintain believe on forward Looking we lines.

receivers XXXX revenue for We initiatives. execute year industrial scanning the IoT the accelerating expect on as XG remain antenna revenue with we strong later product to in through

U.S. XG in have in XG Canada The operators Europe in five operators Canada operators U.S. PCTEL's and of five major Asia many receiver begun and the in scanning infrastructure. All the solutions. and four deploying top use largest

used which receivers Interestingly, receivers begun XG and Our and testing historically by Korea, sub-X wireless Europe have millimeter solutions networks. also in not operators South we used has gigahertz scanning XG our Asia. in deploy XG scanning are leading selling to

We XX another to network take have many to It XG between latency To-date and in out believe XXXX. XG countries systems end allocations countries completed to will phases. XX advanced of spectrum completely the the autonomous for support connections applications allocate or broad increased IoT XG now plan approximately years early solutions. support that industrial licensing require to massive roll low capacity, are rollouts frequencies and and

to to the same and within XG to gives existing the technologies This as when testing new XG spectrum higher dynamic XG operators DSS networks, operators not Spectrum back or to revert capability PCTEL spectrum and use XG flexibility Sharing allocations. to a then help operators recently allocate access spectrum transition applications from needed Dynamic throughput for XG added needed. sharing. both To XG to support allows

which the same HBflex feature XG spectrum, signals and IBflex scanning spectrum. helps can LTE DSS test to and the PCTEL's additional XG XG without dedicated transition to across operators receivers having both simultaneously use and support

currently IoT generates high public mission-critical market throughput three enterprise that latency. segments wireless, industrial transportation to require majority derived advanced and technology IoT our enterprise applications support Ultimately, intelligent targeted scanners, a safety. enterprise XG wireless Of of WiFi and XG will be revenue, low which an from segment is with enabling industrial our the

to has leverage relationships same PCTEL scanning been for markets. developed safety, sell public into the Within to its strong receivers the able promote antenna and solutions

Our safety more our safety offering public companies are for now on we have PCTEL's the engineering solutions receiver and XX antenna solutions than distributors largest U.S. in and certified tools. service public scanning

quarter The WiFi engineering during we responders expect received to access local the our leading design point embedded buildings service in if for manufacturer from radio we applications well. antenna test on buildings to companies do the behalf global in IoT a Also first communicate win determine emergencies. jurisdictions of the WiFi products and a can

transit WiFi has anticipate connectivity. new segments precision and market in wireless over intelligent transportation needs that years support been address the to We industrial faster we and these applications. Although, market our announced several that will fleet, grow IoT segments for our and a segment strongest enterprise LTE, industrial antenna both market location high-performance innovative of energy IoT XG, with combines Bluetooth next

positive have wireless more designed reliability rail, supports and critical component safety control is applications. networks antenna public a antennas advanced variety become systems precision fleet and greater provide The it complex. to of industrial IoT for PCTEL train of systems a Coach become and II as

our ruggedized solutions include access and our our antennas. interface expertise product increase complement ruggedized antenna RF industrial IoT radio portfolio, radio device to portfolio PCTEL to To cards our OEM to These IoT expand leveraging product for include points, our is offering will and customers solutions.

for We Our of second XXXX. generate the integration first will WiFi will to in announced solutions of radio begin several believe later these half revenue month. be this product OEM releases

China, are With to are that encouraged respect tariff increases hold. trade discussions further are we progressing on and

to and restrictions tariffs entities in uncertainty present Chinese risk China, trading our on the some current business. the relations certain with However, with

changed. increase have to manufacturing plans our Our not flexibility

reduces will exposure making We to manufacturing, Tianjin. manufacturing our transition XXXX. the progress with contract which are through transition in The continue

work important that Even our results. believe this continue will an area and in these I U.S. be fourth challenges and China, consecutive we pleased improved are term, Longer with with operating and through for is sequential issues China will to the market China PCTEL. the quarter

year products what best: delivering doing finish do we expect solve the strong We RF complex that problems. to

our closer will quarter. that, I third call now at for over to With turn Kevin the look a

Kevin McGowan

financial David. you, third address were ended the higher antenna XX% and fourth to I Revenues XXXX. Revenues million quarter, guidance. I sequentially the XXXX, the will results compared third provide scanning product last the product third in Thank X% up revenues and September $X.X higher of and antenna quarter third last measurement of test $XX.X third strong revenues because to $X.X the quarter were compared receivers, sales will quarter. both year. XXXX million revenues quarter than million for third and were year’s were the test and in revenues XG XXXX, quarter measurement quarter higher With higher

$XX.X the revenues XXXX, quarter of were product higher third X% Antenna third to XX% the million sequentially. and in quarter higher compared XXXX

were antennas for applications declines higher and for revenues quarter Third offsetting antenna intelligent cell antennas. small fleet for transportation product

foreign in and to cost The by XXXX was improved for mix a margin the products a third more quarter for and favorable compared of the margin prior due primarily reduction gross also changes, of the product third and impact test GAAP favorable within in actions of XXXX higher to the profitable the X.X% product year, XXXX. gross quarter antenna but X.X% percentage mix taken currency line, XX.X%, products The because gross to due antennas. to improved percentage profit margin measurement for

of Adjusted a third Adjusted XXXX. to negative in was percentage million was loss third EBITDA quarter XXXX. of quarter quarter as $X.X million the XX% XXXX, X% compared EBITDA $X.X compared a in for margin to for quarter third revenue XXXX, the the third

because third XXXX the to quarter XXXX. margins. Non-GAAP third per the negative higher $X.XX of earnings higher per share in last higher and quarter earnings year, diluted gross compared was share revenues was $X.XX to in Non-GAAP profit compared

GAAP China $X.X the Company’s to million Our related results expense for included plan transition for manufacturing. restructuring

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

allows sheet We shares. our also repurchase opportunity to our that recognize us the strong balance

Directors the share for program and to open effective our the Our to up PCTEL repurchase our in may of The program time-to-time program confidence its to a the common pursuant be may which made This through to to stock. immediately opportunistic dollars in growth allocation shares future repurchase strength market this the strategy in PCTEL share flexibility and affords repurchase repurchase us shareholders. approved end purchases, and our capital negotiated potential million Board of from reiterate of program $X opportunity an of XXXX. us be of offers

let’s XXXX Now, quarter guidance. to turn fourth

We and per the expect of XX% GAAP fourth in range quarter The range $XX margin projected revenues to share to will of XX%, the be be be between earnings projected to million. $XX and $X.XX $X.XX. to non-GAAP is the percentage is in gross

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

David Neumann

us. joining for all you Thank

to take we a like questions, Before thoughts. share closing would few I

XXXX. in year-to-date performance We’re pleased with our

for Our in over tools years. company dominant hold a is well-positioned to next XG deployments. several the grow position We providing

us address in RF and is enables growth and Our challenges, increase. opportunities Enterprise strong, is to value. intelligence to their difficult will business to IoT PCTEL solve for and continue a of increase Customers transportation; which the to continue industrial Wireless global number to come have to there us drive shareholder growing market

in forward look on I XXth. investors with November at the and IDEAS investor Southwest Kevin attending Dallas conference to and meeting

available are to I operator? and Kevin that, cut. questions, With answer And

Operator

first Lake [Operator from line. on Instructions] have question the Schmidt our We Jaeson Street.

is open. line Your

Jaeson Schmidt

taking Thanks questions. for my

a an with WiFi Just new with a that comment on is or your new start that embedded want customer? Is to win. customer existing

David Neumann

is – programs of That and with multiple existing have programs. is but our most new long-term customer, they an customers

So developed bid product bid. that eventually and the access then this on, new was a the we point won

Jaeson Schmidt

just if the you've visibility months bit That's year, you next helpful. And first here? the Okay. your improve about talk of seen half little or last can three visibility a into over

David Neumann

segments two the visibility product With different. very are

is at general business relatively test look the receiver the visibility in and measurement you when and in short. scanning So

we really XG the our networks. based when deployment on estimates our of do So, and it's rate and for do XG forecast

really that changed. So hasn't

number their are have several antenna are we antennas that we also customers supply of lines. then, the product And there manufacture for in a space, which distributors, Within to relatively have specific sales. agreements consistent stocking long-standing

there, would on visibility quite a still some bit business. say, I we're but reliant have we So project-based

development roll it's replace projects the off some team with those finish, to business projects. as sales So, additional and to and team up

Jaeson Schmidt

Okay, guys? queue. potential we in mentioned I'll selling think the for about should you South me How that final jump that makes sense. and Korea. scanners for into one know opportunity I And back you

David Neumann

sold. been those Well already of have scanners I the think bulk

it's the there I think, Asia. of independent some the or that Korean will for don't for information of our be change value would be enough incremental large see collecting interesting it's going to the But technology, that RF just of expectations So UEs. XG any forecasts necessarily sales. markets

a the on network. it's data And once I too I XG, think they Xx amount saw uptake important they of the Korea because deployed think in

early one it's So the of XG. adopters for

world as the well networks And think bodes for across are scanners I deploying. the the of that selling so us rest

Jaeson Schmidt

lot a Thanks Okay. guys.

David Neumann

Thanks Jaeson.

Operator

We Riley have Jorge FBR. from B. from question our Fermin next

Jorge Fermin

you. the Marc your Thank in what agencies you gain Have you traction antennas similar additional Filling for related FirstNet for today. for York for did New able to with any City? purposes government to been

David Neumann

transportation deal that in the FirstNet to specifically So wasn't City FirstNet. more York it it's -- mission-critical, an is industrial it for of system. considered New antenna but It's related an necessarily infrastructure sale IoT was intelligent the

it Now about for deployment. excited the opportunity DOT relatively with large a it NY one in was deployment, we're that because

if think I sale one of largest one. it and mentioned not first it's had the was largest we antenna before, our

the say there see then benefit to to support vehicles clear across York area the traffic I would for linking opportunities to other traffic and their the the be infrastructure. emergency So for and New signals in boroughs mission-critical help of ways U.S. are a as other to to going raw municipality even

Jorge Fermin

expense this Great. of transition the mentioned China small you quarter. moving And about financial -- this also should forward? then think impact we that How transition a

Kevin McGowan

we are Probably costs about of We've incur this $X for separation most previously year expense of which the disclosed and will it costs. employee total about half million predominantly of we'll incur. the

Jorge Fermin

Thanks. my for the networks. business? impacts question is your private And to about you're it. in potential some Got marketplace we're Can what hear then and XG seeing last you discussion starting about talk

David Neumann

into so we're Yes. it I Private market just us selling up interesting the is not think carriers. opens because for XG, another

WiFi space, recently Germany in to interesting Volkswagen I specifically the examples of in can't XG XG's the or a think I of really or robotics means going network to get of which XG read in with have across which a difficult main manufacturing improvements low put the you facilities. can it's one benefits private their that the latency you because And one automation -- more XG. and get the is is even within today

So, wider it our the expands into gives to an a receivers set for customers. sure markets, scanning of sell us opportunity

stages. early the it's think I in still

If about XG really you think there's three drivers.

a are pressure is, offload the of now of enhanced some of to operators just first lot bandwidth XG. off the The which the deploying

low enhancements include set of latency. the major The will next

So massive then factories becomes for phase it then warehouses third IoT factor a I And the capabilities. more think and etcetera. of is the

us I would opportunity for will receivers private scanning sales PCTEL. for stage our into -- XG, say But a another a of for are operators. sector So later deploys at still be as early It's the most going it deployments. at

Jorge Fermin

it Great. I appreciate will I over. hand that.

Operator

There [Operator would now no closing remarks. turn questions the to the further are over call David phone. I for like back Instructions] to Neumann

David Neumann

today. Well that tell I recorded guess can you the call we

better and experience. better So over that have let's control

I apologize that. So of our behalf service on provider for

performance very comments, pleased the closing last with are in we the But over year.

and from grow a XXXX, provide believe returns into standpoint that we is the investors a execution both strong expect. in the and company the and As to position strategic year I finish get

course to support. you our our investors for Thank especially of thank next on and and afternoon. for the a hard like updating look and forward and I their continued have employees great -- work call. dedication partners would to their We you

Operator

joining today PCTEL's Third you Earnings Call. us Thank Quarter for XXXX for

You disconnect your now may lines.

PC Tel (PCTI) 10 Nov 192019 Q3 Earnings call transcript