PCTEL : Q2 2023 Earnings Call Script

1. Kevin McGowan
2. Thank you for joining us on today's conference call to discuss PCTEL's second
3. quarter 2023 financial results. With me today is David Neumann, the Company's
4. CEO.
5. Please note that a webcast replay of this call will be available on our website.
6. Before we begin, let me remind you that this call may contain forward-looking
7. statements and projections based upon current circumstances. While these
8. forward-lookingstatements and projections reflect PCTEL's best current
9. judgment, they are subject to risks and uncertainties, particularly related to global
10. supply chain and logistics challenges; global political and economic
11. circumstances (including inflation and a potential recession); ability to generate
12. sales of our innovative new products; success of our expansion efforts in Europe;
13. and ability to leverage our distribution channels, that could cause actual results to
14. differ materially from these forward-looking statements and projections. Risk
15. factors that could cause PCTEL's actual results to differ materially from its
16. projections are discussed in the earnings press release which was issued today
17. and the Company's annual report on Form 10-K. The Company assumes no
18. obligation to update any forward-looking statements or information, which speak
19. as of their respective dates.

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1. Additionally, our commentary will include reference to the following non-GAAP
2. measures: non-GAAP gross margin percentage, non-GAAP operating expense,

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1. non-GAAPearnings per share, and adjusted EBITDA. We believe these non-
2. GAAP measures facilitate comparability of results over different periods. A full
3. reconciliation of these non-GAAP measures to GAAP is included in our quarterly
4. earnings press release that was issued earlier today.

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1. I am now pleased to turn the call over to David Neumann.

1. David Neumann
2. Thank you, Kevin.

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1. Good afternoon all, and thank you for joining us today for our second quarter
2. 2023 conference call. Today we will discuss market conditions, review our
3. second quarter performance and share our outlook for the third quarter of 2023.
4. Kevin will then review our financial results in greater detail.

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1. Incoming orders improved in the quarter, driven, in part, by a large OEM
2. customer increasing purchases as their higher than normal inventory levels
3. began to decline. We are pleased to report that customer supply chain issues
4. are improving, which also contributed to the increase in orders.

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1. At a high level, we delivered second-quarter revenues of $20.6 million, a
2. decrease of $4.4 million year-over-year, but we achieved strong non-GAAP gross
3. margins of 49.5%, up 3.5% from the prior year period. Top line performance was
4. in line with our expectations, and the decline both on a sequential and year-over-

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1. year basis was due to lower revenues in both product lines. Although revenue
2. decreased in our antenna business, incoming orders increased in the quarter,
3. which will contribute to revenues in the second half of the year and into 2024.
4. Scanning receiver incoming orders also increased and the revenue comparison
5. is to a stronger than expected first quarter, as Kevin will highlight soon.

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1. As always, I would like to thank our PCTEL team for their continued dedication
2. and contribution to our business and growth. Through their diligence, we have
3. been able to continue to successfully navigate today's challenging operating
4. environment. Our supply chain relationships remain strong, our on-time delivery
5. metrics remain high, and our inventory is in a good position for the remainder of
6. the year.

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1. Later in today's call I will discuss our three core growth strategies in greater
2. detail. We continue to make important progress with our industry leading product
3. launches, customer and distribution expansion, and work to provide more
4. components of our customers' systems, which continue to serve as the
5. foundation of our operational success.

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1. I would now like to turn the call over to Kevin for a review of our second quarter
2. 2023 results. Kevin.

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69 Kevin McGowan

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70 Thank you, David.

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1. Total revenues were $20.6 million, essentially the mid-point of our guidance
2. range and 17.6% lower compared to the prior year period. Revenues for
3. antennas and Industrial IoT devices were $14.4 million in the period, a decrease
4. of roughly $3.2 million compared to the second quarter 2022, with lower antenna
5. revenues for enterprise and public safety applications due to customer inventory
6. levels, as well as customer supply chain challenges with other system
7. components. It is worth noting that these issues are starting to abate but still
8. impacted performance during the quarter. Test & Measurement revenues were
9. $6.2 million for the second quarter of 2023, $1.2 million lower compared to the
10. second quarter of 2022 primarily due to lower OEM sales, which declined
11. following a particularly strong first quarter. In addition, performance in the
12. second quarter last year was very strong, impacting the comparison to that
13. period. We expect the rest of the year to follow the typical cyclical pattern.

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1. Second quarter 2023 gross profit margin percentage on a non-GAAP basis was
2. 49.5%, above our expectations, and a 3.5% increase from the year ago period.
3. The increase in gross profit margin percentage was primarily due to a stronger
4. gross profit margin percentage for Antennas and Industrial IoT devices. Non-
5. GAAP gross profit margin percentage for antennas and Industrial IoT devices in
6. the second quarter 2023 improved by 6.5% compared to the second quarter
7. 2022, due to continued improvement in logistical and operating costs relative to

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1. last year coupled with a favorable shift in product and customer mix. The non-
2. GAAP gross profit margin percentage for Test & Measurement products was
3. lower by 4.2% in the second quarter of 2023 compared to the second quarter of
4. 2022 due to higher component costs.

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1. Operating expenses on a non-GAAP basis were $9.0 million in the second
2. quarter 2023, a decrease of $0.7 million compared to the second quarter 2022.
3. The year-over-year decrease was primarily due to lower expenses in sales and
4. marketing related to commissions and marketing programs, as well as lower
5. expense accruals for incentive compensation.

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1. Other income was $0.3 million in the second quarter 2023 compared to $0.1
2. million in the prior year period. The year-over-year increase was primarily due to
3. higher average interest rates.

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1. Adjusted EBITDA decreased by approximately 33% to $1.7 million in the second
2. quarter of 2023 compared to $2.6 million in the year ago period. Adjusted
3. EBITDA as a percentage of revenue was 8.5% in the second quarter of 2023
4. compared to 10.4% in the second quarter of 2022, and non-GAAP diluted
5. earnings per share was $0.07 in the second quarter 2023, exceeding our
6. expectations of between $0.02 to $0.04, but was lower by $0.03 compared to the
7. second quarter 2022. The decrease in earnings per share and adjusted EBITDA
8. can be attributed to the lower sales volumes.

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