PCTI - Earnings call transcript Q2 2022

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Operator

Welcome to the PCTEL Second Quarter 2022 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will 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.

Kevin McGowan

us XXXX conference financial joining PCTEL's to for quarter second results. you on call today's discuss Thank With me today is David Neumann, the Company's CEO. a that our note webcast be will Please available website. replay on

call based upon circumstances. let you me Before current forward-looking we projections that begin, this and statements may remind contain

and projections. projections as issued subject the the update challenges, While Company's and information results forward-looking circumstances its COVID-XX forward-looking could distribution recession, are actual discussed supply XX-K. and logistics are PCTEL's pandemic, economic annual our report projections and in circumstances uncertainties which geopolitical or today current speak judgment, and on reflect statements press respective could to Company to global factors to their these risks was PCTEL's particularly obligation Risk global Form assumes channels the including no actual cause and which any cause these from to they differ differ The statements dates. statements materially earnings of forward-looking expand to opportunities that related to release, chain from materially that results

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

David Neumann

product margin year-over-year and and we vision, To discuss by In XX% consecutive past us. quarters market earnings summarize revenue net new was the and grown our third product minus over $X.XX quarter long-term of the later the per $X.XX $X.XX The our $XXX,XXX a will was Company sales executing per report income QX, followed million Kevin. to lines. quarter. a was are or quarter each scanning $XXX,XXX we supply GAAP Good $X.XX and managing improved the has second first to growth outlook will compared pressures releases. our afternoon, net of through details receiver and driven vision the XX% today's the the share joining in and $XX performance gross share you, quarter, of revenues for conditions for pleased great of six in the loss the quarter in in the in per job Thank the of half of inflationary in and done successfully more progress Non-GAAP chain strategies XXXX. I'll has challenges. for by team you second We're XX% GAAP Non-GAAP in increase sequentially. Kevin compared making to or strong the our year, quarter provide second 'XX. due The on performance and our call. call, steadily share to thank start, each

higher considerably in see they still improvements pandemic. transit both fees times shipping both before than We although continue and are the to

safety, wireless utilities. on We such verticals also more mitigate to particularly expanding Eastern and potential and XG Wireless vehicles logistics, connectivity networks and manufacturing our and to as is continue Europe rapidly as risks. investigating approach systems in rail, productivity wireless connectivity rely to efficiency ability our public to contract are optimize growing automation cost drive strengthen manufacturers Mexico agriculture, and in carriers,

for scanning RF in receiver We and are safety a distributing designing and products applications. carriers public leader wireless global

applications. for products most long-term industrial critical the that enable is include Our to and vision our expand antenna position wireless to connectivity leadership IoT

systems, quarter will all providing in core in is and by look increase more greater discussion and expand our Kevin the later products, our which distribution call leverage for launch a growth vision strategies: discuss market of by overall long-term second the wireless share Our supported I'll closer the channels over at to three components innovative of Kevin? call. we that, With and the turn detail of financials.

Kevin McGowan

Thank will review followed financial third detailed begin of a XXXX results I with our you, David. quarter today outlook. quarter our second by

quarter and of the the of revenues and in second XX% revenues million second revenues in the million compared quarter and were due the to of the to exceeded industrial increase in recognized test applications second an revenue This Smarteq, the second revenues Test measurement Our antennas XXXX. quarter IoT of in fleet expectations. second for end a in of of due increase XXXX Revenues to line for of quarter product were $X and for expectations Total of approximately were devices end XXXX the antenna earnings period, quarter in related second for million $XX.X acquired at antennas XXXX. an our $X.X IoT quarter from industrial and full product the devices higher were both our and high both XXXX XXXX. to the which quarter our higher million revenues of of our April measurement compared to $XX was is increase our and at line.

XXXX products higher the Our compared were measurement through test sales XG OEM stronger for and due customers. to second of revenues primarily to million $X quarter

lower by was in a leverage. industrial quarter margin an XXXX. was gross non-GAAP XXXX and margin to sequentially. the on XXXX resulted profit flow cash of offset from the $X.XX of XXXX. the compensation second quarter, quarter quarter non-GAAP in favorable of lower expenses, quarter of quarter $X.X XXXX. IoT in marketing expenses compared in primarily financing of because primarily share higher gross to Adjusted product non-GAAP of approximately travel EBITDA second of compared second was compared as the quarter test but second X% antennas $X.X And on When on due mix quarter the diluted quarterly antennas and compared $X.X by to flow million the primarily margin $X.X second year-over-year quarter and $X.X compared the to in million of lower approximately related used X.X% the and increased free to costs increase in same quarter and $X.X XXXX quarter higher and offset and of in gross in XXXX percentage second by increase dividend. the gross our X.X% payment XXXX, increased of non-GAAP decrease of basis and devices. by of the to second gross earnings were and The XXXX. to which $X.X quarter the trade activities investments quarter second activities devices of profit a less margin per $X.XX XXXX. for our IoT cash a XX%, Cash profit second of revenue quarter the million second XXXX The to was the full The XXXX shows million as second than quarter non-GAAP the the basis The Adjusted quarter favorable of million $X.X XX% the industrial first XX% operating a sales second for the XXXX. EBITDA second was of sequentially quarter for the expenses. higher was cash million improved products XXXX, of compared profit were incentive other cash second of percentage second operating and in percentage Financing measurement margin of of million $XX.X included higher the was The of as million end second quarter to end at Operating XXXX, investments by the Smarteq million.

paying and capital available for having and and hand on dividends M&A flow Our of strategies quarterly supports cash investments activities. our funds cash allocation

$X.XX With expect the demand our going quarter our of into product the range non-GAAP guidance. And quarter mix, third XX% $X.XX. to per be we on to expect our million. range the the of and range of profit in third to $XX.X be we Based to to million margin expect XX%. to the Turning gross in $XX.X in share we our achieve in backlog products, to earnings non-GAAP percentage for continued revenues

guidance of back call to approximately the higher midpoint revenue quarter in is XXXX XX% XXXX. represents year-over-year the a million compared quarter range $XX.X quarter With and David. the third of the the to turn third than at third XXXX now The that, increase will I

David Neumann

expanding Thank you, components growth into key Kevin. dive deeper channels and to over that by strategies earlier products, systems. would in now more I to our against launching like providing distribution and market share leveraging wireless our innovative three spoke the overall the call: I increasing progress

variety antennas and of terms includes strategy PXX, products, and innovative wireless LoRa measurement test used our technologies, across equipment others. a our devices, RF XG, growth first launching including In and core of product WiFi, presently wireless suite of IoT

include devices interfaces access ruggedized for IoT wireless remote Our points, devices sensors. wireless IoT wireless and

essential. products U.S. With utilities, our the their may enable to wireless extreme currently of high IoT any respect that that vehicles connectivity the oil applications and and we sales and you to in environments expand tracks, antennas, for have transit. that on including to automation, are factor markets, railroad of in recently on XG, successfully withstand This combination infrastructure that rail the designated manufacturing, a always the are and IT gas. several makes rail, fleets, soon support conditions vehicles IoT approval high several look accepts identify portfolio, reliable supports we quarter, seen mass for and XX-in-X European for mini was approval are purpose-built hazardous FCC industrial module standard received cards. specifically antenna regulatory to the product to radio antennas our This expect PCI targeting antennas As critical range including ensuring necessary new mining These track. platforms, The integration are stay launched These in module's and radio transmit where for connectivity. and provides fleet rail, its solutions continuous into power ideal trials, portfolio it in for rugged small form where modules networks designed we we

will market these for expanding shipped quarter. in second first we this the the antennas orders be And an The Company. for believe growth

We in logistics stations utilities, continued strength EV charging for and markets, agriculture, Europe including in and vehicular the also the see in U.S. antennas

be of Our this our public the In orders test from demands ancillary and meet measurement government and quarter, XG largest XG will receivers as is customized The defined currently agencies and multi-carrier our receiver wave OEMs in scanner across in products can It multiple dollar on single new software lightweight delivered to capabilities Gflex test The designed scanning to walk-and-drive scanning year. the Gflex safety releases sub-X to multimillion is XG two XGPP produced we purpose-built, Gflex portable that of upgradable the markets. operators, as the focus and to and bands team testing measurement band innovate. through software-defined was unit. for and HBflex be add and is test millimeter second specifically first wireless gigahertz every network a radio our support products a that complex specification. continue

capabilities addition applications. Gflex In wireless government networks, to the intelligence has for testing carrier signal specific

are for this continuously performance. monitor public our test a front, year. the SeeHawk safety new expect progress in initial monitor, year, We this in public responders. in-building the safety scanning of RF On sales are announced first receivers used QX will we Trials coverage and to product that

Second channels globally. for XX% currently be future to approximately leverage and expand represents sales growth. our core of to region growth America revenue and is our largest strategy our continues and North

into our OEMs and and the strength OEMs a are applications. past quarter, distributor additions to two over strategic agriculture distributors. the strategic Our of channels has XX space second with in remained additional the due months Business continued significant strong by supported large number in main markets expand particularly to sales

we We our the expect long-term our Smarteq, as We strategy very performance. to of presence see continue in be last this with reach. acquisition year their pleased and we to increased leverage Europe growth drive distributors' with

continue We and the new both investments the presence a make including team region, evaluating our to distributor internationally. in others adding and grow to

Americas. products primarily our OEMs We've region. mix historically Asia major in XG and our the to through scanning and into we're had deployments distributors product launched the strong in strengthen U.S. sales see in and our the receiver expand OEMs, offered have encouraged picking up portfolio to We Smarteq our also again

applications. Although for multimode in more for competition antennas, high-performance critical there there opportunities that our Asia our local require antennas is are

As capture such, the and additional share Europe in Asia we future. market in to expect

by regional In third to market existing core share providing is customers strategy our addition expansion, to increase solutions. integrated with

radio specific devices antenna a to that IoT markets and larger of spend on wireless integrated can the be Our custom portfolios capture portion into customer address projects. solutions

built-in and and a a platform for PCTEL sensor includes our customers deployments communication with for antenna our customization. of strategies foundation sensor, wireless within core for three and the share providing and of electronics, in wireless growth channels and wireless and more innovative believe strive As solution have launching by with strategies a the radios market growth to be antennas of the increasing leveraging integrated market. continue ruggedized in enclosure components These an for these products, We battery-powered sensors to expanding quarters. Company. We a example, through driving board competitive growth advantage simplifies kit coming proven the our development integration provides distribution

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

preparing concerns challenges successfully from as ongoing for team remainder have the our on for doing geopolitical and have excellent the financial such and the may and year pandemic, first The ongoing is conflict. half plan and situation evaluating financial year. confidence the XXXX result strategic We that global through an of risks executed job the of the

continue will expectations. contact with or exceed close in our to to meet We customers stay their

dependent As necessity wireless connectivity, demand becomes for systems world our high-performance increasingly the wireless on grows. and

are will by more providing core We that stakeholders. systems and growth components for overall long-term confident of distribution drive of high-quality strategies products, our expanding benefits innovative market channels and increasing and all developing share the our

PricewaterhouseCoopers, past remain additional that public on and multinational forward focused specialized company he has working served CEO has and a most communications and looking telecommunications the in stages I'm where partner of enjoyed and Inc. financial XXXX. to CFO Board companies Regarding to eight his Jellyvision private of largest years, him is the Levy and and with employee for XX-year Jay as will his variety company, as responsibility like Lab, with PCTEL for the Chair in consulting career is of both as well clients, of veteran a various Jay SaaS support currently Keith of guidance over Committee. the the governance, companies she He I her as Cindi Chair take serves career, been benefits and in the recently firm, professional and for our acquisitions the announce mergers technology Throughout years of companies. including a as CFO January as experience services and executive on to with audits became with as new of She excited Committee. Audit world's private a an companies. Board XXXX. role. Audit has global on she in Steve or in growth. for on new Chairman thank July industry since effective our Chairman guidance X, XXXX. Jay served of I'm a public Directors. serving appreciate would Board the five I will our Sinder

we with them Group is relations that our have and Relations and available the Alpha's IR closely forward also as working are investor firm. can leading Alpha PCTI@alpha-ir.com. website, builds We firm directly to to pleased contact protects, that the IR chosen them. investment America's on Us, you The announce Investor an under Relations Contact new end-to-end enhances Alpha look our contact of Investor brands We at companies. information is

take Kevin questions. Annual With I be and Conference I Operator? attending Ideas available Sixth meeting Street conference. Finally, to in look the Best York at and are forward We on that, with Lake Wednesday, to will investors September New Kevin XX. Growth

Operator

Capital. from [Operator is Instructions] of Lake coming Your first Jaeson Street question Schmidt

Jaeson Schmidt

really Congrats nice on some results here.

you expected? start by chain relatedly, was to Just in in of show initially ship Or QX. better demand driven if supply better did supply curious what the you the was guys with QX the because outperformance quarter, compared themselves want any that just conditions chain. than to really had guess start And more expected? to I there I'm demand couldn't

David Neumann

Yes.

I were with So chain don't supply think other issues we limited for companies beyond product. delivering

to for closely lead situation any longer the both the has times working a and Of for they alike. job pretty components with course, needs some antennas meet into really products. very But their kind scanning to line good customers deliveries for that and don't specific there's of team go for sure done down make receivers

shifting in it had coming think QX, in strong very a don't if was necessarily QX supply the into year recall, But we I backlog. QX because you then chain issues. of So products into and

shipped helps and products taken with usually for the our because are quarter. where So come so definitely the more, more antenna receivers portion say, in that a are quarter, the us within products backlog that of the transactional same would quarter the a good the scanning shipped I orders from are

expect. and would us pretty into that on Now good the were puts with scanner than some coming our in it backlog quarter being the considerably within QX two the OEMs said, position we too. And Gflex from for orders higher a HBflex front,

Kevin McGowan

the the on key we're those hit able the Jaeson, think, question, a the high quarter. to is orders second end demand why I your of reason from OEM for revenues

Jaeson Schmidt

the Okay. mentioned That's portfolio of North American you introduction the helpful. the And then Smarteq market. into

feedback curious been Just how far. so has

David Neumann

U.S. course, thought Of most stations. been the successful products would applicable be has those in stations. Smarteq some of the picking for EV see the that's charging cars we the for And antennas. the for And of the SmartDisc giving to that of of some this we EV station is very U.S., countries credits charging about products in passed, Nordic to charging that one prioritize with we the a extent, some will well. bill be lot demand as help And drive up EV vendors

into in U.S. the So trials. They're those we've products brought

going first. they're where vehicular too. their way U.S. on head Some And going brought We've likewise, in didn't beyond have much the PCTEL a Smarteq. would promote those of so through perhaps traction the we've quickest And in OEM need now white distribution area. customers other the up, one have as those, And Europe. some distributor of for hired over or we're that that introducing then region. the are the just antennas new whether we And in using labeled. the antennas, other to We're are that, brought ones recently antennas we're the

to in too. we Europe, PCTEL be there'll to extent opportunity products an move So a greater think

Jaeson Schmidt

And in just queue. Okay. for the the back and one me, last I'll jump

there. traction business the Can the we big upon about some know first in nice you continued highlighted and business. should test you build momentum? orders that second this half? think measurement here Some in I half How

David Neumann

through So these OEMs. two orders were

the for wireless predominantly they're So operators.

operator need. safety. traction this wireless at first of growing same the through a are So XG there in the we're of not as half necessarily It's doesn't the is lot getting public That that continued a but opportunities. include the rate year, cellular

So we've just systems. measures done well which reports, And their Central, SeeHawk allows SeeHawk presents introduced SeeHawk the launched upcoming a And signals. -- be We with the going of collects data, Monitor just or testing users very it space does to the the is then in building manage IBflex. the that we because launch Monitor. things: to One, uplink two important announced the

phone are two, emergency time. typically So a is the device smaller because weaker in situation the device. or on all the they're And those an just

can the operators pick -- interference monitor And RF. it scanning is constantly fix the and they the help So will if those. sources, they're up those intermittent

But half are impact there is and we're any XG safety operators, much won't the won't have need, an some drive quite that on year, potential So of impact this third -- and more and orders room still of have with which has really were the And think has growth. to I bit will working then customers. the grow. government second There part or in think focused a the a although of -- of that, public on longer-term the I space. that's

way to the and it they have the a into what look visibility it's your like, backlog is what measurement And terms measurement. we calendar on often have But for spend, good does better on going the In now as test spend And is of some and quarter case, for half to the pretty receivers equipment. scanners. on QX test because than QX, have budgets scanning customer question are if budget some historically, we because year. second

that we going expect would be it's So have too. a historically, some strong quarter pretty pretty I is always year, QX this backlog, And a quarter. good given to

Operator

Your next question Wealth Ascend is of coming from Bair Advisors. John

John Bair

there real that in any area of strength Couple Is seeing orders? you're particular questions. in,

David Neumann

for is we operators. definitely antennas. We and big for mentioned the the well. Utilities I is equipment doing Agriculture the test the in XG a mentioned it measurement think for strong earlier call. area the orders

vehicular the antenna space is I of well. Some probably front. think the agriculture the is beyond, doing on But strongest

John Bair

And new customers new thing, that in? any areas any headway you're making the other or

David Neumann

the team out the -- customer our reason and of And distributors. number try into products what lot just to build us customers, And to what than areas. our key channels end is customer. reach every a figuring One are point-of-sale it direct distribution gives new trying strategies leverage expand best single is selling getting to just to more a the of information, reach sales

quite focus say would networks and space. to that hence, we're new a And I So distributor we'll channels. continue few distributor through in seeing customers come that

John Bair

Okay.

giving you So words, distributors board bringing newer in you're these potential markets? new that... Is are to other exposure on that

David Neumann

about Yes, think it.

So you to need a project on antennas the you're of and prototypes. do couple a working

go to distributor. You a

that you volume. You more then antennas. you the go Once antennas running, and the buy you product and distributor to the back up in buy have

to way product it's provide very efficient a end customers. to So just

John Bair

seeing that? quick Or the is overall, then increase on an you And overall are Okay. turnover in backlog? your pretty

David Neumann

definitely towards but keep high Well, this at quarter receiver end. record, Backlog have in another scanning that heavily been orders. mind was may weighted the that's

front, year. on quarter close antenna usually it's in the was is. But for probably say backlog a it's the would scanner than I been what it pretty to given historically higher So a

Operator

Trust. question next coming Instructions] David from [Operator Henry Our Wright is from Investment

David Wright

that contemplated is if affect long-term successful? My describing. you question to is about it's that were the vision margins How

David Neumann

for Well, would more, say, products I on focus we applications. in critical the general,

rugged, the mechanical strong that lot products a that cases, RF capabilities, are require So the withstand can that of that require in designs elements. --

front, growth longer as do investments same get have a high Company. price, we cover So about over increase the grow. we bit, as engineering for to focusing on term, the the but expect to margins, this to And Typically, rate leverage those probably to areas better on -- then can the continue we're make make us Kevin going reliability. allow the

On that about G&A in have support we the enough size. we the of front, of could And the sales place in a terms twice rate growth. probably half then G&A, now company

some the able would and margin over to leverage get there increase overall be we So percentage time.

David Wright

mean channels I is more your market have -- ask, me new long-term But let and vision financial distribution some might to just Or if get I products, goals it? expand it does launch share?

Kevin McGowan

We've got financial goals. $XXX Right now, range we've the targeted XXXX in million EBITDA. and a $XXX revenues to XX% range XX% be of to to in million

at And the quarter. And improve David FX. So of on from margins antenna on we here, improve it's this kind we're up XX% can EBITDA how leverage where think the then about profitability, we can we the stand following we said from side. what

certain improving in where were some But our are costs we year from of and from and us U.S. improving with those allow products a the on margins freight efficiency doing antenna last will margins. We the perspective -- improve we're of the targeting well. down to that lower-margin as with some pricing things operations

Operator

from next question is coming Millennium]. Blackwell Your Rudd [Steve from

Unidentified Analyst

A don't quarter. where stand I at. we obviously, great I mean quick question. know

there this I've an are in typically, cash, and or the on through updating so. I've one on don't out are honestly, where place we we buyback a that I know been a when like upswing the of you or myself. some know And XX XXXX. to You're in been share of on I just have we utilize of Company years track. deal lazy good right over was cash in and cash And buybacks. program. that

we to So where headed. might and we as if enough be you would to be where update good are

Kevin McGowan

million did we of consider September completed end programs. end $X XXXX Since worth was each approved haven't quarter. new We buying between Yes. we it and do up 'XX. any XXXX, that stock in And the but of about of then,

are point, pending Our programs. reviews But it. Board at no there this

Unidentified Analyst

fair have So in what just to we towards understood a program cash. it But I is I'm aiming the was do XXXX. amount that of follow up, ended

valuation Our is low. currently

market is high. opportune And in Our seems market a the prospects -- It market, are general is. an depressed price that stock time.

hit act triumvirate So to on and it. of we've seems here it opportunity a the perfect buyback almost authorize

your So speak Board? thoughts as go what with are about you your that

David Neumann

So week the have Board of cash as through the so, finished a hand. meeting, was or buyback, last we the discussion last that about we which a went we on in there amount

long-term strategy has -- is always M&A. included strategy Our

So in Smarteq 'XX. we acquired

least at to very to team space. still at fragmented look owners and especially side, along we've like M&A look being Smarteqs Board Most the meeting, in last do to a But creates the to or areas, more decided which meeting. are of acquisitions. a sure opportunities continue couple for and to same allocation U.S. find in buyback management same on the Board to not those challenges this for continue -- antenna the companies ready at in We antenna immediately. and the It's the the We'd the again and we'll the space. are But larger sell. some the Europe. And next valuation just at smaller a review companies the capital in want use cash

Operator

to We hand appear in further Okay. any closing have queue. I'm now over the back David [Operator going to comments. for questions Neumann Instructions] no to

David Neumann

Well, afternoon. all afternoon. thank good their you to joining to Thank customers suppliers safe. PCTEL. course, Thank for a employees, for this us and, everyone of and you wish I you our stay commitment our our

Operator

gentlemen. you, ladies conclude today's does This conference and call. Thank

Thank for disconnect at may have participation. your and this you time, day. a wonderful your phone You lines

PC Tel (PCTI) 13 Aug 222022 Q2 Earnings call transcript