Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to PCTEL's Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Kevin McGowan. Please go ahead.

Kevin McGowan

Thank you for joining us on today's conference call to discuss PCTEL's Second Quarter 2023 Financial Results. David Company's is today me Neumann, CEO. the With

replay call will note that available this webcast a website. Please be of on our

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

success inflation PCTEL's challenges, statements subject they economic global cause of and particularly of political reflect risks supply global including current and from related sales judgment, our to projections. products, and in our innovative and While generate differ statements these expansion to to Europe, our new projections and ability distribution chain best recession, ability forward-looking efforts uncertainties, and a channels actual are potential to materially and leverage to circumstances, forward-looking that logistics these could results

could on to its results company that XX-K. factors respective speak was differ the press as actual dates. report PCTEL's of are the assumes projections obligation statements today update release, cause annual Form which from issued company's earnings any information which in forward-looking discussed to or The no the materially and Risk

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

the call to to I'm turn now Neumann. pleased over David

David Neumann

and for quarter review will our review second results Thank discuss conditions, we XXXX quarter our Today, you, detail. Kevin joining performance conference will greater you for us today Kevin. afternoon quarter XXXX. share on the our thank in Good then all, outlook and market financial third our second call.

quarter, as higher-than-normal the in OEM increasing by levels customer in purchases large inventory began the decline. driven improved part to a orders Incoming

achieved second issues to At quarter the X.X% high level, supply which increase report delivered pleased of are customer $X.X we a year margins million, XX.X%, decrease million non-GAAP $XX.X prior chain are a We orders. but gross in to up period. of improving, strong we revenues the that of also contributed from year-over-year,

Top due year-over-year revenues our product and lower on expectations in line was lines. and basis a both was performance sequential to line both the in with decline

in year business, revenue orders Kevin stronger-than-expected revenue quarter, comparison and a as incoming Although revenue decreased of incoming first to soon. quarter, half in and increased which the orders Scanning the XXXX. antenna the to our increased into contribute second in also will receiver highlight is will the

thank and continued to team to to dedication their our today's to their continue environment. navigate have diligence, contribution been like would PCTEL our I able for successfully always, operating and business As growth. challenging Through we

supply chain relationships Our remain strong.

remain of delivery position and year. high a metrics Our the the our is on-time in good remainder for inventory

strategies call, discuss today's in Later growth core our greater I three detail. in will

foundation We which continue expansion to provide as customer success. serve with to a make to systems, product customer continue operational progress more distribution and and for important our our components of launches, industry-leading our work

our of the I to Kevin results. would call to review a quarter second now over turn like XXXX for Kevin?

Kevin McGowan

for second the chain to for supply Revenues customer $XX.X million decrease as well of customer lower enterprise due compared year public levels prior devices quarter XXXX. the and other inventory the were to antennas David. and of applications With you, $X.X to IoT compared revenues safety roughly midpoint million, system $XX.X and Total a million revenues lower challenges guidance the antenna essentially period, were components. XX.X% and period. our Thank industrial as range of in

XXXX, during to Measurement strong quarter but the the $X.X primarily particularly noting sales, and compared of first which quarter. quarter million lower a still quarter. Test due impacted It following issues & these to second X.X starting XXXX of million are declined lower abate, is worth were that revenues OEM performance to the for second

strong, to was in quarter year last the impacting second comparison addition, that the period. In performance very

We expect the rest of the year to cyclical typical follow the pattern.

XXXX was above year a profit from in IoT and ago expectations profit to primarily basis for a The due margin stronger gross period. gross XX.X%, devices. quarter and percentage a percentage increase X.X% non-GAAP on our gross Second increase percentage the margin was profit industrial margin antennas

Due in for X.X% the in IoT Non-GAAP product XXXX compared year, gross quarter by to last of antennas devices improvement profit margin logistical the mix. customer relative to in and and improved coupled quarter a favorable operating of XXXX. percentage shift industrial to second continued second costs and with

non-GAAP for quarter second higher Measurement to lower by to of the due component XXXX costs. Test profit X.X% The & margin quarter of XXXX compared the was products gross percentage in second

commissions lower Operating as primarily $X million as expenses and of to for The in incentive related sales in XXXX, were second quarter decrease basis compensation. to and a to expenses well decrease was programs due expense non-GAAP a compared million the quarter of second marketing marketing on year-over-year the accruals lower $X.X XXXX.

income in increase period. of average year-over-year prior was interest $X.X quarter the Other second The compared in due $X.X primarily to was the year rates. million million higher XXXX to

to earnings $X.XX quarter XXXX. second be The $X.XX the diluted and lower $X.XX was share per by to EBITDA in the by to sales $X.X revenue was million the our but of XXXX. $X.X in decrease lower as in XXXX, EBITDA a second of to expectations XXXX share compared approximately quarter XX% earnings in to second And compared $X.XX, decreased quarter of can the in compared between in year-ago was million attributed XX.X% of the of XXXX EBITDA volumes. X.X% the non-GAAP second percentage to period. second per Adjusted quarter quarter exceeding adjusted Adjusted of the

by of inventories second approximately reduced second cash contracted approximately the Cash the revenues, $XX.X million increased were million, and of to XXXX. our the at with end sequential $X.X by by the and Compared $X.X the investments investments first and quarter our of million lower quarter during million XXXX, end $X.X quarter. we receivables

the focus inventory We both product will continue levels in lines. lower managing to to on

quarter the Financing for our million. quarterly activities dividend payment $X of of second included

strategy Our for healthy cash and cash paying on M&A capital cash our funds of allocation quarterly hand support dividends activity. available and investments and having flow

Turning third quarter to outlook. our

to revenues improvement million. million the lines. as line Top the With is similar second to the see trends range quarter continued headwinds product We some on for expected expect as to flat we positive both sequential expect mentioned be of and areas performance a supply $XX in previously. We inventory in in David in basis. $XX that chain performance be

the margin to $X.XX. to non-GAAP be our We the of profit XX% percentage expect to and gross earnings range we $X.XX in XX%, expect share range to in of non-GAAP the be per

cash by the is confident XXXX, the our there product in around operating accretive ensure in ways for use global generated grow ability uncertainty value-enhancing While to environment we and we're on-going in the and business our our shareholders. offerings

With that, I David. will turn the back call to

David Neumann

growth now progress quarter three on towards Kevin. during the core like strategies you, comment to would I and generally more our discuss our Thank the developments in business.

earlier, systems. mentioned expanding include channels expanding I distribution share wireless innovative leveraging and overall by of providing market these and products our the customer increasing launching more and As components reach

base network including industry-leading This users mission-critical With XG broadband which wireless and real-time SeeHawk signals to launches, XG system Monitor stations impacts network we detects network base of safety our XG and and for interference changes and capacity may and and product. and decodes products Monitor can monitoring release, collect innovative and XG capabilities addition the announced multiple evaluate public have networks. conditions, the in our indicate pleased of to downlink product station this for with and in quarter, XG notifies XG quality. SeeHawk are signals that Beginning

of growth and broadband emergency will government monitoring networks other applications and this the utilities, support services. for stadiums such hospitals, private Ultimately, mission-critical as venues

sensing. Sensor. platform, is operate an a provide IoT in solution In edge designed environments connectivity sensor reliable Edge and and industrial July, ruggedized, we This with the a announced harsh integrated improved and and antenna IoT to

automation. combines advanced The build top and including as expected agriculture, are the in exciting Edge to the next industrial our of solution further launches our integration is based housing. ability evolution ruggedized to customizable contribute the a Sensor of in variety an onboard upon view to on These and a and that from mining a IoT external our of single and commitment process We in for Customers radios to step utilities, antennas growth to for sensors and needs highly applications components, select industrial their smart have platforms driving active innovation Edge come. sensors. product Sensor PCTEL's with years two

globally also for a networks countries of positive XG Measurement deploy more Test We continue with rollouts XX than planning & XG XXXX. number in developments to business. our saw

will increase. tools initial Measurement required address capacity & as to be need additional Test the then and deployment for usage applications and for Additional

over network year. the public safety second the that secured In significant will delivered orders testing in-building systems quarter, be for we next

public We and of data Central safety testing. and also building cloud-based SeeHawk usage for growth see management in our reporting

trials Monitor with current have use and purchase public beyond has other cellular government up potential the the Finally, this orders. markets potential and SeeHawk product believe of working several safety sales to open to to begun customers new on convert in cases. We budget

improved mentioned, headwinds chain ease. supply I As orders antenna as to incoming began

vehicle, which market receiving that comprehensive We orders we electric for antenna expanding by easier tool the customers make to agriculture, in in end select within our and tool construction expect public customer are further an the online penetrating reach antenna orders. year, it and to encouraged we selector markets should increase appropriate antenna most to launched wireless safety the the for large and have continue of make to the routers strides selector

are beyond support in that Additionally, targeting X we secured significant design applications. and wins launch revenue latest WiFi and XG to XXXX IoT, antenna enterprise drive X expected new omnidirectional platforms industrial the and and technologies that

to & many and each momentum ahead like in see that Asia markets opportunities plan of for XG across ample they spectrum our within have public XG sizable businesses. safety our markets in Europe, our channels Africa rollouts. Within mentioned still as There I are opportunity global and now would Test I on deployments. and we sales allocate Measurement, that touch

new larger the distributors. through antennas, to continue customers to our respect of growth see buying With in we number

issues beginning major ease constraints of improve. to For supply OEMs our OEM antenna for customers our safety chain and are public beginning one are to inventory

also handling receive started that have customer We material a for a year. to major from delayed orders more than been

of that European building XXXX. a are large vehicle pleased backlog year a we order and received from share we electric remainder to Lastly, into for the this manufacturer,

delivery, perform as to continue Asia well customer in manufacturers on-time it to and relates quality contract Our satisfaction.

evaluate China Asia to consistently in efficiency and continue and contract North outside U.S. working factory manufacturers the our and Southeast are America to optimize We

have to expertise of and Moving leverage success third antennas. complementary the we our by customers that market our with products with increasing growth integrated great solutions, customers enjoyed providing existing our providing core strategy share with

year for with Our trial a smart antenna end platform significant in Edge vehicle ruggedized customers, meter the the utilities point a Sensor, is sensor expect by an we and and applications. access of order heavy for integrated

I'd some business. comments overarching the like provide to on

As and done. continue previously the incremental to see noted, customers remains issues, But to underlying starting increasing, are I there is we through as be inventory to temporary and healthy. environment Incoming shared, are orders demand improvement. work work still

Test is recognized unmatched, our IoT solutions devices in and best-in-class market. and industrial antennas for the Our solutions as Measurement talent are and &

strategic as global reach invest the through growth in With we of products, remainder continue in mind, to will and XXXX. year the priority we and our into work the of people

strong the inorganic As business. also opportunities growth the our explore remains sheet invest flexibility and Kevin mentioned, appropriate. in with provides to as balance us And

we're half of year. investor back the upcoming to some forward conferences Finally, the in looking

in well and as Conference be forward at New Street September will of to in the We with you as some the look both meeting York, Wolf attending events. these Lake we December, Conference in

like also also pleased are a expertise great we and would Board deal to to from experience growth, PCTEL's retired alongside will our Directors I welcome years future after tenure be excited Tony's Giacomo PCTEL. value service, and Tony Directors. Board IT to XX be of of I'm of invaluable share in added that June. Giacomo's working Rossabi to within telecommunications him. to to PCTEL's industries deep and Marini

the over With that, Operator? to to the call for turn questions. operator like would I

Operator

question go is from Jaeson we Please first of The Street. ahead. Instructions] [Operator Schmidt have Lake

Jaeson Schmidt

and questions performance margin QX. gross results. congrats want come with Hey the the I really guys strong to in... start thanks seems to on my taking for just have It in

Operator

Jaeson.

line speaker a for the a moment, Just that. lost moment. main Apologies We connection with just

question. been Jaeson, go have main your rejoined by ahead pose the We speakers. and please

Jaeson Schmidt

mix congrats gross my know seemed Hey as with start the guidance. strong guys, mentioned I thanks drove down. logistic anything kind and taking coming want to questions as for initial But some to margin. costs outperform I that QX results. else really outperformance? that well you of on

Kevin McGowan

half first freight in the Jaeson. No, year. costs that's really were -- of higher last our

reduction continued the lower mix was was on and product The ended So big costs side. a that being products there. up mix element with good the tariff

to gotten contact We've have some operating here. head lower costs been of optimize facility. our get Bloomingdale from We that able the efficiencies some count out to lower and also

Jaeson Schmidt

you you're market seeing Okay. you in That's on But market traction could helpful. of And and any additional updated in the provide on I what know Europe. curious EV on U.S. us the color there? the sort EV if any

David Neumann

Yes.

we investors through So that Smarteq EV know initially about I think X market most the acquisition ago. into got years the

So had relationship with Smarteq EV also in with manufacturer. very the strong stations a countries. And vehicle had the charging a strong Nordic position charging a they've pretty

EV that We're and Smarteq different process both can of broad we've range as been cross-selling station vehicles So get would some to the integration the to products. some developed kits to send in the well. the We've charging the antennas. wins get able on integrating say, and of manufacturers PCTEL electric we now I antenna

in that's process. So

of leveraging the that in some manufacturers in are We're same or the Europe U.S.

there's excellent think reference we're say accounts. the provide Europe, it not But are we same we some there. does but I pursuing opportunities So accounts. in at as still some would scale We're

Jaeson Schmidt

helpful. really That's Okay.

the back I'll and last into Just queue. for me, jump one

those your early issues corrected noted anticipate that Do improving. and doesn't is of public be inventory at are OEM get until after kind inventory major situation really QX Or safety a You this issues resolved the into XXXX? bleeds QX? to you

David Neumann

Yes.

on that number So of OEM PCTEL. we have just through. based that inventory lot a making that we're of working the of of they're with the assumption visibility placing orders the But don't is level

We're So we increasing. lot orders a decreasing see we how don't have visibility on it, inventories but inventory much assuming see have. we of they

this estimating rest run through So probably going increase the we'll back probably XXXX. then I as level year think that the into same safe, we're at to and be will orders of

Jaeson Schmidt

That’s guys. it for me. that’s lot a Okay, helpful. Thanks

David Neumann

Jaeson. Thank you

Operator

I Instructions] call reached gentlemen, end like David would and turn closing Ladies for have And [Operator to we of the the to remarks. the Neumann question-and-answer session. back

David Neumann

thank of Irene. to you, here your again, of us afternoon. PCTEL for business for once Thank our Thank to for I'd Thank to and support you the all PCTEL time customers and you today. this growth commitment company. continued team joining our like to their your

Operator

gentleman this and Ladies that you Thank for joining us. concludes conference.

You may now lines. your disconnect

PC Tel (PCTI) 8 Aug 232023 Q2 Earnings call transcript