PCTEL, Inc.

Welcome to the PCTEL third quarter 2021 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.

Thank you for joining us on today's conference call to discuss PCTEL's third quarter 2021 financial results. With me today is David Newman, the company's CEO. Before we begin, let me remind you that this call may contain forward-looking statements and projections based upon current circumstances. All these forward-looking statements and projections reflect PcTel's best current judgment. They are subject to risks and uncertainties, particularly related to the COVID-19 pandemic, the global supply chain and transportation challenges, and the impact of our acquisition of Smartech Wireless AB that could cause actual results to differ materially from these forward-looking statements and projections. Risk factors that could cause PCTEL's actual results to materially differ from its projections are discussed in the earnings press release, which was issued today, and the company's annual report on Form 10-K. The company assumes no obligation to update any forward-looking statements or information which speak as of the respective dates. Additionally, our commentary will include reference to the following non-GAAP measures. non-GAAP gross margin percentage, non-GAAP operating expense, non-GAAP earnings per share, and adjusted EBITDA. We believe these non-GAAP measures facilitate comparability of results over different periods. A full reconciliation of these non-GAAP measures to GAAP is included in our quarterly earnings press release that was issued earlier today. I'm now pleased to turn the call over to David Newman.

Thank you, Kevin. Welcome, and thank you for joining us this afternoon. In our call today, I'll review our Q3 results, including the impact of supply chain disruptions, discuss significant product launches and design wins across our three product lines, and then share our thoughts on the remainder of the year and our expectations for 2022. As you may have seen in our press release issued after the market closed, we met our earnings estimate on lower than forecasted revenue. Revenue grew sequentially, but the revenue shortfall compared to our guidance was principally due to two supply chain issues, which limited our ability to manufacture, ship, and recognize revenue for certain antenna products during the quarter. Incoming orders remained strong and improved sequentially over the second quarter, which, as you may recall, was one of our best quarters for incoming orders since the second quarter of 2019. We've addressed these two supply chain issues, and we will continue to address others as they arise, but we believe quarterly revenue and earnings will grow through the end of the year and into 2022. Our customer service and operations team have done an excellent job working closely with our customers to minimize the impact from supply chain delays. While raw material shortages delayed some shipments of our antenna products, we ensured that we met our customers' critical demand through planning, proactive communications, and engagement. Constrained supply of specialized plastic materials and adhesives used in certain of our antenna products posed the most significant challenges and had the greatest impact on our revenue for the quarter. These issues were resolved late in the quarter, and we do not currently expect similar constraints through year end. In Q3, we achieved $22.4 million in revenue $2.3 million in adjusted EBITDA, and $0.08 in non-GAAP earnings per share. Earnings grew sequentially, and revenue grew both sequentially and year over year. Revenues were 18.4 percent higher quarter over quarter, and EBITDA was higher by $100,000 compared to the second quarter. We achieved non-GAAP gross margins of 46.7 percent for the quarter, which was lower than the third quarter last year, as a result of a shift in product mix towards a lower margin antenna revenue. Next, I would like to provide an update on achievements in our three main product areas, antennas, industrial IoT devices, and test and measurement tools. Our antenna business, driven by strong incoming orders for agriculture and vehicular applications, is performing well. We added three new distributors since our last call and released a new 5G configurable and low-profile antenna platform that supports intelligent transportation, public safety applications the new trooper max 5g antenna platform is designed to add land mobile radio or lmr connectivity through an external whip port if required it is compatible with the world's leading cellular router supporting 600 megahertz to 6 gigahertz frequencies and covers wi-fi 6 frequency ranges as well our smart tech team continues to exceed expectations Smartech is recognized as a leader in supporting wireless connectivity for electric vehicle charging stations in the Nordic countries. And the team recently won the antenna business for additional smart meter and cargo tracking projects in Europe, which will begin to generate revenue in early 2022. We are pleased with our performance and we will continue to invest in our capabilities and leverage these reference customers for open opportunities in the United States. Within our IoT device products, we delivered our first ruggedized Wi-Fi access points that provide reliable Wi-Fi connectivity in harsh environments for industrial equipment, heavy machinery, and construction equipment. We expect to receive additional orders for the access points in the fourth quarter. As we mentioned in our last earnings call, we expected to see a temporary slowdown of 5G tests and measurement purchases due to European and Asian 5G deployment delays. These are short-term issues primarily related to the pandemic, such as spectrum auction and deployment delays. 5G networks still only cover about 20% of the global mobile user markets. The unique capabilities of 5G, such as 100 megahertz bandwidth and support for millimeter wave frequencies, require more advanced test and measurement tools that PCTel provides. In addition, wireless operators need to test 5G simultaneously with legacy technologies like 4G LTE and 3G to support existing customer bases. This further complicates testing. With our emphasis on engineering expertise, PcTel has a long history of developing innovative scanning receivers that often lead the industry in capabilities for testing efficiency. PcTel is a leader in providing advanced scanning receiver solutions. We are very excited to announce the availability of our next generation scanner, the G Flex. The G-Flex scanning receiver is designed to support drive testing, in-building testing, and government applications for 5G and legacy networks. The G-Flex is a single, lightweight scanner that collects all millimeter wave and sub-8 gigahertz data required to benchmark multiple operator networks in one testing session with one unit. In some cases, engineers may need four or more of competitors' scanners to accomplish the same tasks, making the G-Flex more cost-efficient. The G Flex is the only drive test scanner that collects data across the entire 100 megahertz channel and also includes IMQ hardware that supports detailed measurements often used in government applications. We believe this scanner presents new opportunities for PCTel for homeland security, the military, and other government applications. As the pandemic situation improves and broadband applications grow, we expect pent-up demand for 5G services thus driving deployments and the need for more advanced and compact scanning receiver products. In the public safety space for test and measurement, we announced our cloud-based Seahawk Central application last quarter and are pleased to share that we received our first order from one of our major public safety customers. Seahawk Central will be used to improve testing efficiency by centrally storing collected data from the field, automating the processing, and providing secure access to test results across entities responsible for ensuring reliable communications for first responders. Our plan is to add features to the platform and launch new products in the public safety space to maintain and grow our leadership position. As I mentioned, we continue to add strategic distributors that are interested in PcTel's broad product portfolio, including our industrial IoT solutions. We believe the growth in the US economy, the recovery of international markets, and the rollout of wireless IoT applications will drive PCTel's product sales for antennas, scanning receivers, and IoT devices to create long-term revenue growth. With that, I will now turn the call over to Kevin for a closer look at our second quarter and a discussion of our financials. Kevin?