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spk03: and share our thoughts on the remainder of the year. As you may have seen in our press release issued after the market closed, the second quarter results were at the high end of our revenue and earnings estimates, despite ongoing supply chain challenges and transportation delays. Our team has done an excellent job working closely with our suppliers and customers to limit the impact of these issues. In Q2, we achieved $21.7 million in revenue, $2.2 million in adjusted EBITDA, and $0.07 in earnings per share. Earnings grew sequentially, and revenue grew both sequentially and year over year. With SmartTech included, revenues were 9.3% higher quarter over quarter, and EBITDA was higher by $1.4 million compared to the first quarter. We achieved non-GAAP gross margins of 47.5% for the quarter, slightly lower than the second quarter last year, driven by antenna revenue growth and shift in mix. I'm pleased to report that the integration of Smart Tech is progressing smoothly and the teams are working well together. We acquired Smart Tech to expand PcTel's presence in Europe, add product lines in our key vertical markets, increase our global R&D capabilities, and provide support to launch our IoT devices in Europe. Smart Tech has met these goals and exceeded our initial revenue and earnings expectations. We're especially pleased with our combined ability to generate backlog and the long-term opportunities to cross-sell PcTel and Smartech branded products in Europe and the US respectively. Going forward, we will include Smartech design wins, product launches, and opportunities in our IoT device and antenna updates. Our IoT device and antenna business is normally driven by larger orders that are delivered over months or quarters versus our test and measurement business which tends to be more transactional within a quarter. For this reason, we monitor antenna incoming orders as a leading indicator of expected revenue in future quarters. We're pleased to report that our incoming order rate for the second quarter exceeded our expectations and was at its highest level since second quarter of 2019. This is another factor supporting our belief that antenna quarterly revenue and earnings will be stronger in the second half of the year and continue to increase over the remaining quarters. In our enterprise wireless market segment, our sales to OEMs have increased, driven by wireless infrastructure deployments in manufacturing, retail, and other enterprise markets as they recover from the pandemic-induced recession. In our intelligent transportation market segment, we see continued strength in agriculture markets and believe there will be further improvement in the second half of the year and into 2022. We expect a bipartisan infrastructure investment bill will create additional longer-term opportunities for our products to support industrial IoT and wireless applications in public transit, rail, broadband, environmental, power infrastructure, and electric vehicle or EV infrastructure. Smart Tech is the leading antenna manufacturer for EV charging stations in the Nordic countries, and we expect charging station manufacturers in the U.S. will want a proven product like Smart Tech's Puck antennas. It is also notable that we won the antenna business for a significant mass transit project at APAC, resulting from our efforts to capture more business outside of China in the region. You may have seen in the press release in June announcing FCC certification for a recognized Wi-Fi access point. European approval was granted in the first quarter of 2021. FCC certification is a major step and will allow commercial deliveries to our OEM customers who have integrated the access point into their systems. These access points provide reliable Wi-Fi connectivity in harsh environments for industrial equipment, heavy machinery, and construction equipment, and accordingly have significant higher average selling prices than antennas. We were awarded two design wins and have accepted our first production order. We continue to add strategic distributors that are interested in PcTel's broad product portfolio, including our industrial IoT solutions. Enhanced channel distribution supports our strategy to leverage sales and distribution reach across many market segments, reducing the need to field experts in each IoT application. We believe the growth in the US economy, the previously mentioned infrastructure funding, and the rollout of industrial IoT applications will drive PCTel's industrial IoT, intelligent transportation, and enterprise wireless business and contribute meaningfully to our long-term revenue growth. Our test and measurement business produced another solid quarter after setting records in the fourth quarter of 2020 and the first quarter of 2021, driven by 5G deployments and our strength in the public safety markets. Although we expect scanning receiver revenue for commercial networks to be consistent through the remainder of the year, there has been a temporary slowdown in 5G spectrum auctions and deployments, particularly in Europe and parts of Asia, primarily related to the pandemic. It is important to note that 5G deployments are still in the early years. As referenced, GSMA, a wireless industry organization that represents the interests of wireless operators, estimates 5G will have about 20% global penetration by 2025, And 5G will account for 80% of total capital expenditures over the next five years. As the pandemic situation improves and broadband applications grow, there will be pent-up demand for 5G service, thus driving deployments and the need for our test and measurement products. Public safety is an important market for PcTel. We are the leader in both public safety testing solutions and antennas for first responders. PcTel's first data collection and analysis product for public safety is now used by more than 100 engineering services companies in the U.S. We recently announced our cloud-based Seahawk central application that will improve testing efficiency further by centrally collecting the data from the field, automating the processing, and providing secure access to reports across entities responsible for ensuring reliable communications for first responders. Seahawk Central provides a platform for workflow automation, data analysis, storage, and secure distribution of reports and is sold on a subscription basis. Sales of our public safety antennas remain strong with recent wins from new customers and increased incoming orders from some of our largest existing customers. Our antenna and device businesses are building momentum and our test and measurement business is well positioned to support growth and public safety testing, and to grow to test 5G deployments as global economic conditions improve. With that, I'll now turn the call over to Kevin for a closer look at our second quarter and a discussion of our financials. Kevin?
spk02: Thank you, David. I will review the financial results for the second quarter ended June 30, 2021, and I will provide third quarter 2021 guidance. We are pleased to report sequential financial improvement And as David mentioned, our second quarter results were within our guidance for revenues and earnings despite the supply chain challenges. Revenues of 21.7 million were 9.3% higher in the second quarter of 2021 compared to the second quarter of 2020. Revenues for antennas and industrial IoT devices were 15.6 million, an increase of 1.7 million compared to the second quarter of 2020. This increase for the second quarter of 2021 is primarily due to revenue recognized from Smart Tech, which was acquired on April 30, 2021. Test and measurement revenues were $6.4 million for the second quarter of 2021, an increase of $.3 million compared to the second quarter of 2020. The second quarter of 2021 revenues for test and measurement products were approximately 5% higher than last year, as revenues for U.S. public safety applications offset lower U.S. revenues for 5G technologies compared to the second quarter 2020. The second quarter 2021 gross profit margin on a non-GAAP basis was 47.5%, which was 0.9% lower than the second quarter 2020. The decrease in the gross margin percentage was primarily due to a higher mix of antennas and industrial IoT devices, but also due to a lower gross profit percentage for antennas and industrial IoT devices due to higher freight costs. The non-GAAP gross profit margin percentage for test and measurement products was approximately the same in the second quarter of 2021 compared to the prior year. Operating expenses on a non-GAP basis were $8.9 million in the second quarter of 2021, an increase of $1.4 million compared to the second quarter of 2020. The increase results from inclusion of two months of SmartTax operating expenses and employee-related costs, including salaries and incentive compensation expenses. Operating expenses for the second quarter of 2020 were lowered due in part to measures the company took at the beginning of the pandemic to control costs, including temporary reductions in salaries, travel, and other discretionary spending. Due to foreign exchange losses and low interest income, net other income and expense was expense of $45,000 in the second quarter of 2021 compared to income of $102,000 in the second quarter of 2020. Adjusted EBITDA was $2.2 million in the second quarter of 2021 compared to $2.9 million in the second quarter of 2020 but improved sequentially by $1.4 million. EBITDA as a percentage of revenue was approximately 10% in the second quarter of 2021 compared to 14% in the second quarter of 2020. And non-GAAP diluted earnings per share was 7 cents in the second quarter of 2021 compared to 11 cents in the second quarter of 2020. Cash and investments were $33.4 million at June 30, 2021. Cash investments declined by approximately $7.1 million during the second quarter, primarily due to cash use for the acquisition of Smart Tech. We generated free cash flow of a half a million, paid our quarterly dividend, and spent approximately $700,000 for the purchase of about 108,000 shares during the second quarter of 2021 under our share repurchase program. As of June 30, 2021, we had up to $2.5 million of our common stock that could be purchased through the end of 2021 under the existing share repurchase program. And we also purchased shares valued at more than $1.5 million during the third quarter to date under the repurchase program. We continue to be subject to uncertainties with the global recovery, but the momentum that David discussed related to our antenna and industrial IoT device business will drive sequential revenue growth in the third quarter. Driven by the sequential growth in antennas and industrial IoT devices, We expect revenues between $23 and $24 million in the third quarter. We project our non-GAAP gross profit margin percentage to be in the range of 45 to 46%, and the non-GAAP earnings per share to be in the range of 6 to 9 cents. With that guidance, I will now turn the call back to David.
spk03: Thank you all for joining us. Before we take questions, I would like to share a few closing remarks. We're pleased with SmartTech's contributions to revenue, market access, and talent. Our strong balance sheet will allow us to pursue additional inorganic opportunities to drive growth and to meet our capital allocation goals. We're excited to see early success with our access point, new distributors, and public safety initiatives. We believe product diversification with expanded distribution channels will create meaningful sales leverage and long-term growth. Kevin and I will be attending the Midwest Ideas Investor Conference virtually on August 25th. We look forward to meeting with investors at the event and eventually in person as conditions improve. With that, Kevin and I are available to take questions. Operator?
spk00: Thank you, ladies and gentlemen. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone now. We ask that while posing your question, you please pick up your handset, if listening on speakerphone, to provide optimum sound quality. Please hold a moment while we poll for questions. Your first question is coming from Jason Smith with Lake Street. Your line is live.
spk01: Hey, guys. Thanks for taking my questions. Sorry if I missed it, but just curious what the supply chain challenge is. If they created any headwinds in Q2. and what you're baking in for some of the impact from these constraints in Q3.
spk02: Jason, the supply chain increased the time for our shipments out of China on the ocean, so it did delay some shipments from the second quarter that will be shipped in the third quarter. And we did bake that into the third quarter forecast. It's something we're continuing to work with our suppliers, work with our customers, try to get forecasts. And so we've mitigated any significant impact, but there is some impact to that that we're still working through. There's still long lead times with the shipping companies and getting product in from China particularly.
spk01: Okay. That makes sense. I guess relatedly, everyone understands the constraints out there. Are you at all concerned that customers are double ordering here? What's your thoughts on overall inventory in the channel?
spk03: Hey, Jason, sorry. My call dropped right when you asked about supply chain. So I'm not sure what Kevin answered, but I can jump in as well.
spk01: Jason asked a second question. Yeah, I was just curious if you're at all concerned about double ordering by customers, just given the well-known challenges out there, or if you do think the channel inventory remains fairly lean.
spk03: I'm not too concerned about double orders because our customers are facing the same challenges as we are in terms of supply chain and some of the logistics challenges with shipping. So if anything, this has helped PCTel because we're getting a little bit more visibility in the long term. Because we know for some of these components, you know, lead time's quite a bit longer. Of course, we're working very closely with our customers, talking almost on a daily basis to make sure that their lines don't go down. And we're getting a little bit more advanced notice on what the needs are and what the forecast is. So it's helping us to plan better. But I don't sense at all that customers are ordering more than they need because everything's pretty tight.
spk01: Okay. And just the last one for me, and I'll jump back into Q. Just curious if you could update us on what you're seeing in the enterprise Wi-Fi market.
spk03: Enterprise Wi-Fi has a similar technology upgrade path, similar to cellular, so 4G to 5G. With Wi-Fi, you're going to Wi-Fi 6. So we're getting a fair number of bid requests for new antennas. So it may not get as much exposure in the news is 5G and some of the applications around IoT. But Wi-Fi is still going to be very important for industrial IoT, especially for front license bands. And we still see a solid business funnel and bid funnel for Wi-Fi.
spk01: All right. Thanks a lot, guys.
spk03: Sure, Jason. Thanks.
spk00: Once again, ladies and gentlemen, if you have any questions or comments, please press star 1 on your phone now. We have no further questions from the lines at this time. This concludes our question and answer session. I would now like to turn the floor back to David Newman for closing remarks.
spk03: Thank you. And thank you all for joining us this afternoon. Of course, I'd like to thank our employees, customers, distribution partners for their contributions, especially in these challenging times. As I've said before, and we're still in the middle of the pandemic, we'll still see some challenges for, I would say, for the remainder of the year and going into 2022. But I believe that the company will continue to recover in the second half. As we said before, we're seeing incremental improvement now. And that'll help build a momentum for the following years. So we have a lot of confidence at PCTel. I'd like to wish everyone a good afternoon. Stay safe. And again, thank you for joining. Operator?
spk00: Thank you for joining today's PCTel's second quarter 2021 earnings call. You may now disconnect your line.
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