PCTI - Earnings call transcript Q4 2019

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Operator

Welcome to the PCTEL Fourth Quarter 2019 Fiscal Year Earnings Release Conference Call. At this time, all participants are in a listen-only mode. And at the conclusion of our 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, the company's CFO. ahead. go Please

Kevin McGowan

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

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

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

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

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

David Neumann

Thank three you call in us for you, today. topics our afternoon. I'll Welcome, Kevin. and this thank cover joining

for our XXXX the coronavirus reported fourth recently risks and the antenna to receiver scanning Our results recent product the business quarter, the with for associated and and updates product lines.

technologies. our product several Over investments. stakeholders emerging invested and sales investments the and development benefits engineering, our address capabilities we competitors to PCTEL the of and we in are from and years, IoT These past heavily developed the XG industrial have these realizing distinguished

our from $X.XX XXXX, grew non-GAAP close, issued release in and our press XXXX earnings to our market in in seen have $X.XX may per increased share negative you our revenue by a As after receivers The the to over X% $XX.X antenna to results. scanning gross sales increased than more of products improved margins higher contributed margin strong our product mix on and million. with XXXX

test and quarterly earnings high X.X% non-GAAP our gross Overall, non-GAAP per year. sequentially, measurement third $XX.X quarter share compared fourth a our in and and both generated achieved share product were EBITDA and a achieved quarter. increased quarter of last margins revenue to fourth by we XX.X%, earnings XXXX, per the we $X.XX historic over revenues line. the for In Adjusted And million.

in believe favorable call, mentioned last on As through can product we maintain XXXX. our lines margins we both

With The coronavirus three risks respect team healthy. PCTEL. to for China, thankful we’re is our presents

of work time First, and have start that presence in We basis. from part we we're to China. the employee on the a were outbreak, to returned significant has proactive happy report coronavirus the team

manufacturing X. Our February opened received with Tianjin this capacity on XX to XX% factory on XXX% to March approval capacity. week And return we

there of Second, in limit China. could are in be believe chain intensive antenna our and impact most products. ability certain will chain We China chain manufactured don't manufacture supply receivers disruptions in to inventory hand. a for on QX our products scanning originates these have Supply adequate supply within because Maryland

for will economic global products. on the revenue. impact on comment their customers the anticipated later our our demand reduce downturn Third, impact Kevin QX and may

strategy of our chain will and we components, of China which of and transitioning supply careful contact XXXX. inside to production Taiwan. China. product are our includes through on execute transition lines certain outside availability in factory key The mitigate costs, to of continue We and capabilities, consideration from continue manufacturers to risk, logistics After diversification Tianjin manufacturing

OEM. We’ve WiFi execute Enterprise antenna enterprise front, to which continue strategy products and our system WiFi fortress design recently receivers, for Wireless to for enterprise XG our portfolio. scanning we on win an received public safety business, embedded On includes the our major

interference globally to infrastructure and the use Wireless troubleshoot in dense scanning and to issues coverage, our user rollout, includes which operators are of coverage operators environments. licensed identify frequency XG, in bands. improve For RF receivers increase deploying early stages confirm across capacity XG

For operators, feature networks. and popular bands. that an our to test scanning bands, frequency to multiple upgrade that easier it allows recently benchmark receiver bands launched high will to make operators both to and and all HBflex This technologies PCTEL for low simultaneous test need testing across competing

WiFi Enterprise to control. wireless Without connectivity industrial data are there IoT IoT. no wireless are sensors, XG remote from and analytics, is about no predictions enablers analytics. all Industrial there and for data. is reliable Without sensors, connectivity

data manufacturing, and to name wireless rail industrial connectivity and to mining, systems utility few. for antenna have radio enable a and solutions that reliable Our IoT ensure applications, analysis

the public Just for multi-band and won grid our to FirstNet recently, we three significant dedicated projects, safety. which Yagi include network antennas smart

included antenna and smart transmission fourth power underground monitoring. device win Our grid for an and integrated LTE

at Within we wins other advanced cities anticipate and systems major control segment, traffic our intersections. market signals that for year intelligent and support project this of monitoring additional antenna transportation

several transit, our Our growth these transportation XXXX, over next these intelligent in that belief in plus years needs fleet, wins, address significantly manufacturing energy applications. to IoT segments market in the segments reinforce will grow industrial and and

We QX, our module. products. the offering more industrial launched also IoT IoT products offer These products through new industrial step will our our IoT allow and us customer to In we include radio significant access channels made IoT towards broadening industrial same radio base. to existing antennas sales a be industrial and sold beyond point

WiFi and of can factories module products, specifically a and wireless connect robotics reliable support and WiFi continue deliver Our temperature in on industrial connectivity including high installed for PCTEL’s to wide for Typically, be strengths, access IoT applications. designed many automation. throughput variety We'll IoT focus our to for over modules. access range outdoor warehouse point connectivity. radio IoT enabling is XXX.XXac wide points

to challenges that that We wireless growth. the products target lead across sustainable solve developing complex markets confident will are

over to for I'll quarter. Kevin fourth the look closer that, call now our With turn at a Kevin?

Kevin McGowan

address last fourth quarter the in products measurement With the public sales I and XG and and XXXX, test XXXX for fourth applications, year, quarter David. antenna quarter fourth were last scanning guidance. $X.X first XXXX, I lowered Thank quarter revenues than fourth $X.X to higher provide while the were safety but this test in and quarter for to December X% compared strong product XXXX, X% with compared and Revenues measurement to year. products of higher sequentially were last were revenue ended the sequentially. you, highest and Revenues fourth line, technology compared product receivers revenues quarter and financial quarter $XX.X for year the will for both will results continued XXXX the quarter. million fourth the year's million sequentially of higher million the for lower

quarter X% quarter the cells, lower lower product X% compared were sequentially. revenues and in quarter compared XXXX, XXXX, quarter antenna XXXX. were lower applications Fourth related WiFi enterprise $XX.X and fourth to to product million with revenues Antenna fleet the to fourth for fourth small

gross percentage. compared in antenna products profit and due profit GAAP percentage the gross profitable XXXX quarter to margin and improved the year margin prior margin X.X% line XX.X% mix. by profit fourth antenna due measurement to the favorable to X.X% higher Fourth The for of test more quarter mix XXXX, for product to gross higher was products a

was The in compared X% $X.X and revenues fourth compared quarter million both test lines. fourth product to last $X.X higher share of quarter product because XXXX, in the higher margins measurement was XXXX. $X.XX fourth earnings quarter in and higher product with gross the per XXXX non-GAAP compared significantly year fourth and a for the compared fourth of earnings the as million quarter to for the for $X.X in EBITDA per Adjusted XXXX, fourth was quarter to EBITDA percentage the diluted adjusted margin XXXX. XX% XXXX, revenue the quarter share XXXX, quarter Non-GAAP fourth was

allocation growth forward. be offers cash to Cash flow and share a $X investments capital opportunistic an program $XX.X that reiterate our the affords increased continues strength at to of the to potential of by fourth $X.X pursue company $X.X and as The also was during us in grow strategy program. million repurchase us shareholders going business to end the million PCTEL. flexibility opportunity in actively repurchase future Last can quarter we XXXX. help our XXXX million to free acquisitions share confidence the quarter us million December our This announced our and

quarter turn to XXXX guidance. let's first Now

expect is the to XX%, quarter of $XX.X The and will profit is margin million. million percentage be first to $X.XX. range be revenues projected the Revenue gross in XXXX. quarter first test the are range projected the per compared and XX% measurement in $X.XX to GAAP of and projected be share We products between for earnings to to $XX.X non-GAAP to be higher

of result chain and a to taking with delays larger of products with antenna for in demand due However, The to XXXX, due and to antenna quarter to supply inventory is are in project the lower few OEMs a a of products as revenues disruptions coronavirus fourth ending the for the our outbreak. products decline and large lower quarter our our sequentially with first compared the revenue projected XXXX. be

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

David Neumann

all for you Thank us. joining

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

we disruptions and and coronavirus. radio shareholder caused Antenna products antenna As susceptible IoT for XG industrial need to long-term. expect public for investments receivers years applications, made through growth more demand continues But in to year. we radio that deliveries XG of the PCTEL wireless rollout the increase value the we believe scanning and the well have the few the positioned quality a will are the past and that remain by implementation be drive to products and there over the for of safety consistent

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

Operator

first Lake Thank Jaeson go you. Schmidt we’ll is questions. our ahead. from [Operator for The instructions] floor Street. Please And take question now open with

Jaeson Schmidt

guidance. fluid, impact really can you I hoping understand you're than with and just Obviously, quantify is but seeing want maybe situation that the QX? start help on from QX the impact to the more us coronavirus the or

David Neumann

component a a revenue factory only do has being know impact down reason. antenna of month. There not the meaningful it's to for quantify. that Jaeson difficult been It's a the decline, with but We our

will have weeks been our customer impact down but we report a the estimate has CM better Our of demand, in when for we'll and May. several QX from

Kevin McGowan

the we long-term yes, and some the larger the high distributors streams. important And OEMs, manufacture too to different build is running we And customers. And have inventory set but a having another of are coronavirus is to really of revenue Jaeson, understand needs. really that point make-up their impact,

We've then talked our larger OEMs affected need us as strong had So somewhat -- to before. as two their both it has and of is outlook QX, which directly. antennas, was reduction QX a for into specific some customers; for XXXX coming in QX in the

that XXXX. extent are it one typically QX. of on Couple the in of short-term points So some coming also we were a than our really we at they're of that this cover portion and with quarter impacted significantly last is, more think I is lighter PCTEL QX restricted looking And to good a QX sell scanning from other some end revenue lower project to largest were seasonal predictable. perspective. rollout to QX. Historically, Chinese and year It's driven QX, network. think, -- last year, business addition wins by they of XG year. the being But the with transactional, to of those temporary. But The from a able receiver OEMs, towards more into

But OEMs, recover and they So some for we concerns any year. is see major the some think there. slowness expect the to component in QX the I with later don't that of

Jaeson Schmidt

like such And then traction winning and market you're control systems. seems these walk seeing projects? intelligent why that there. to us some you're just through in Can shifting you traffic early gears why nice the success It

Kevin McGowan

these then transportation requirements. some also of part some think intelligent signal had it the RF specifically our And requirements tough general of I mechanical and projects. to traffic pretty is products approach

into it designing an the that at year and was could enclosure to So that pretty an close indestructible, antenna then electronics off-the-shelf that was intersections spent they use. it accessible public. the so general at We probably that it a wasn't they corner put to of putting much could

one approved that time largest customer, ever large our that major antenna So get some the specific PCTEL, to end that deployment. put and once sale it was And creates us. had think barriers you by city. We you'll project stickiness you in at was and entry remember relatively single for I and

to think could in that trials U.S. cities we're we XXXX. doing the And So in forward looking in additional contribute

Jaeson Schmidt

And always the out last pricing macro jump just I'll for Okay. the the you from a of queue. current back a backdrop? can seeing in pretty but I one competitive are know antenna standpoint, market given ordinary, and be anything the me, the

David Neumann

No, we're not.

for I a that most are or general and to then high our runner designed less antennas of think distribution. for back application, it a become a custom goes more specific they

lose and smaller have as price pricing pressure, was an that not actually business, tend terms And portion of want account, So quite our in margins. you of the that as stay now long bit product we antennas, China. ever from that's away mix the but commodity a it a to pressure not you in as much to helps on more there

Operator

question next with our B. And Weisenberger comes FBR. from Riley Mark

Mark Weisenberger

of gross specifically what a quarter-over-quarter changed and on nice sequential both to the guess, primary elaborate, drove traction you What then How the software expansion the XQ? about of basis test HBflex? kind Very the are I from think the maybe doing measurement. improvement? XQ going Could and we kind year-over-year for seeing upgrades what And margin forward? in customers you should -- factors with

David Neumann

margin and higher in with the software percentage of to is measurement was were QX, upgrades. the for what test with you XG Mark, expansion for revenues that alluded

millimeter deployed the scanning at wave. for the lower yeah, upgrades test That's and these, the frequencies, XG receivers the not to the been used So technologies.

a So higher QX. in was that percentage

see we in with QX. again, visibility be, It it's again looks mix-wise like forward, can favorable to upgrades. Looking going

Kevin McGowan

terms it's in the frequency Mark, upgrades, of driven by really And bands.

we long end the as installed that's the bands a for receivers. base are using So the lower is frequency And they X those less, customer IBflex or in scanning bands. XG for that using XG scanner field frequency those as that the predominantly are support will gigahertz have

is the countries. For and or are three U.S. wave. But in gigahertz millimeter Keep mind the XG using of bands. that the operators the in popular globally, HBflex. a of range deployments the wave at They other bought frequency U.S. couple too the sub-X most in millimeter are

are upgrades Also in units. keep for there have think that there almost U.S., outside that not yet opportunities those software XG. for are the mind, think though, to XX do spectrum still we auctioned countries I So

time take countries spectrum So that there those is then start deployments. to some going auction still some runway, but it's for and

Mark Weisenberger

sales should about forward marketing? Could that that uptick How help was you we the allocated? business going how and the maybe should forward? talk where that about in And and going think

David Neumann

expenses In sales QX, Mark, that costs. meeting and predominantly some higher commission was

higher bit It should little out even a traditionally or in it’s So starting normalize in QX. QX.

Mark Weisenberger

visibility story it. envisioning is that some and evolving more and to quarterly we course Got be perspective? guess to the of I throughout Are year. back how have the linearity from dynamics should maybe you we about should a the half-weighted a situation do XXXX the think about we think some

David Neumann

to good antennas strong then, QX historically, global saying coronavirus usually some reports recession business. or demand quarter which quarter a off test as and quarterly looking for wildcards what globally. Well, XXXX, the and I perspective, pretty a have at be of think that typically does the eventually in falls could us vacations from both a I more of case seen us won't Europe. bit, is XXXX, are QX at business worst mostly market for scanner and a -- that in And a QX well. measurement is help all. for QX From is

the from second our radio So revenue in to don't going additional a it'll changing. from half, there's perspective, products. seasonality If see I be that come

we in November think, so wildcard provide follow revenue. I module ‘XX. the will half corona the we The the our from expect the XXX% module is scanning third then said And perspective, launched I But with could a and the it's we next One be in the couple access we will for going which trends. really radio second is And do And in earlier a -- historical of Two the So, that component that as products we manufacturing in virus chain, over given staff of and some of to as in is is China, receiver supply quite said increase there. all the then bit globally. demand deliveries that for in factory. having be week that and point radio ready staff. a news. this the of customers year, have risks the

resolve until going markets their is a globally they're of is the that I what how the business OEMs, to But of an do where we in that Italy view. virus starts wildcard necessarily get to throws Korea some and predict that fast The seen whole kind today. of We two think But mentioned with we'll with the not wild it's don't feedback hard So an really this issue. relatively in to itself, recover. lot and issue. really ramping estimates demand. from our anticipate But do the hotspots there. does in chain around to We quickly. turning large up changing catch there. up customers, countries is supply this these I've those QX, China card a

Mark Weisenberger

Understood. Sure.

that manufacturers of keep Has to mean, you kind what You talked going on Taiwan. maybe, you're thinking during China and move us China, your what to I a could if and of about proportions, maybe give Taiwan? transitioning breakdown evolved this to And percentage contract outbreak? in in

David Neumann

I so bit China little process the the China, you more moved in we've exposure this into think, us when this we migration. that issue obviously which to a CM a ago. out probably initially product of still one selected than know And Taiwan. to I in can factory now finish going lines year or tell gives have set to also then that, going have take more It's we coronavirus. CM, we've we started de-risk but we're is this with through that more didn't a plan, And XXXX And to flexibility. a us our

China, in up usually thinking the that to them PCTEL it's would CMs timeline important that even note high-running makes aggressive action that to site. faster of were some that also we're well use it difficult – automated what than are we we if -- But that necessarily products more And take definitely now. set move CMs to want that's not runners. So be now. They're that products high out about too have factory. to They're any particularly are keeping to of not it sense the do

say is would factory some to I you is a type be in factory place, of monitoring a customers we through that situation suppliers first. plan through We think it's have with China, do. and not us then be and basis. with that probably in our daily to to going get need and day-to-day, now I percentage difficult a decision this continue speaking have this we And right even now we're to take XXXX. in going of on is what our give can’t mean of at more business to we the fluid what but CMs, we'll which just business will our

Mark Weisenberger

very Thank you. Sure. That was helpful.

Just two me. more quick for ones

You we talked them? when about of get about intelligent those? expect a wins us year. transportation might Can to give when this kind be you able of timeline would you hearing And

David Neumann

we A intelligent lot end up When will through get are systems the transportation and products of municipalities. going them?

So I quarter when pick would or say difficult month a they're going close. to to a

funding by that, driven is too a at this the larger antenna then level. we're supplying city system. also of Some keep mind the in of And component

are there going we're we're the across that So don't I know initiative think now U.S. their sale. deals type date, this but cities really vendors a the part IoT specific OEM we're we of the that for say two systems. to operators specific are are are pushing in close this major position approved that to as U.S. only driving antenna the There to that larger the on of

we these enough think good So don't close. I we're to date on position, will when a information but in we’re you give comfortable have a that

Mark Weisenberger

Okay. one me. And for final

guys frequently have small acquisitions. some looking tuck-in talked You strategic for about maybe

anything that's in volatility you the you that near I volatility? acting with private and on interested in on market public, that prices the imagine changed markets, be are term coming would seeing the With the and down

David Neumann

typically for the so tuck-in acquisitions, are these private companies. Well,

about I the necessarily for a for valuation, in upside provides is the with So agreement need changes for mindset bit an for owners -- some de-risks we're a some fair and volatility going purchase changes owners’ companies company also price. necessarily the biggest working type of it market, buying, think quite with and talked private that of challenge that The lower smaller that earnout we've to -- sell companies they the don't the a doing that the and then a PCTEL. getting really this

preferably We're products their don't but ongoing you basis, Europe, provide IoT into many I And and valuation. space and changes also build more necessarily and detail. their can So on in looking not could companies, active we've tell bring know at that we've any U.S. in business their I in where place. program regular an we are products really have in a go some antenna through specifically we then the looked seen in in to channels position of any any into sales There we're the our Europe. conversations companies,

soon we will you we As let as know. know

Operator

have we of go Lakes. Tim And instructions] with [Operator a O'Connell from question Chain ahead. Please

Tim O'Connell

just answered, kind already but of this were on guidance. questions a revenue QX my So one clarification

So that products? it’s antennas. inventory end year this seeing did attributed hear I OEMs reducing of not for they're your in their though it to for But right changes those demand

David Neumann

I their demand in necessarily if for we outlook they the said know changes. don't a don't see said year. They difference

the So they're don’t and -- demand. that for necessary of can yes, managing some larger that buying And antenna volatility we there lines some to it could especially the between products, they’re well. quarter-to-quarter, chain as they But which PCTEL. OEMs, can the weakness with be from their interpret with be quarters product see be supply

a of yes, it is China. out And so -- there was I getting too products part then with supply would risk that out component. chain some, say of So, products is one getting

Tim O'Connell

Okay.

share … buyback at done look that still hasn't I to the the authorized, been was it I XX-K assume point? yet. this there with Regarding that anything didn't Is

David Neumann

any buyback but can address in Kevin in was this, let We It's Board. -- the did we place. the shares QX. approved I buyback not by

Kevin McGowan

activity our call. next We QX on will report on

Operator

conclude does today. session our question-and-answer for that And

any to for turn back over closing I'll So it David Neumann remarks.

David Neumann

you hard great joining work for look contributions I'd this XXXX. they're and to the on updating for a partners into also forward us course the call. Have afternoon. our thank you team afternoon. putting thank And that We to like next And you. in of XXXX Thank and,

Operator

for today's us quarter joining PCTEL’s for fourth XXXX call. earnings you Thank

now disconnect lines. may your You

PC Tel (PCTI) 5 Mar 202019 Q4 Earnings call transcript