PCTEL, Inc.

Welcome to the PCTEL fourth 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 fourth 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. While these forward-looking statements and projections reflect PZTEL's best current judgment, they are subject to risks and uncertainties, particularly related to the COVID-19 pandemic, the global supply chain and logistics challenges, the expansion of our distribution channels, and the impact of our acquisition of Smart Tech Wireless AB that could cause actual results to differ materially from these forward-looking statements and projections. Risk factors that could cause PCTL'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 their 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. Good afternoon and thank you for joining us. We're pleased to report revenue growth in 2021 and record setting incoming orders and backlog as we begin 2022. Although disruptions in the supply chain create significant challenges in 2021, we made progress throughout the year and had a strong finish. This gives us optimism about our company's future and our ability to grow consistently in challenging environments. In today's call, I will share a summary of the fourth quarter and annual financial results, and then highlight key growth areas for both our product lines. The global pandemic created disruptions in both supply and demand, particularly in Asia and Europe. Despite these disruptions, in 2021, we successfully acquired and integrated Smartech. We continued our investments in new R&D initiatives, resulting in eight patents being issued in the US. We launched market-leading products, And most importantly, we met the delivery needs of our customers. As you may have seen in our press release issued after the market closed, we achieved 13% growth in annual revenue from $77.5 million in 2020 to $87.8 million in 2021. The product mix, which was more heavily weighted towards antenna sales in 2021, together with increased costs for freight, logistics, raw materials, mainly for components, and increased sales commissions, reduced our non-GAAP earnings per share from $0.31 in 2020 to $0.27 in 2021. We remained profitable throughout the year with consistent quarterly increases for revenue, EBITDA, and non-GAAP earnings per share. I'm pleased to share that fourth quarter revenue and earnings were the strongest of the year and exceeded our guidance. In fact, we set a record for incoming orders and backlog, and we expect most of the backlog to be delivered in the first half of 2022. Orders are strongly leading indicators as we enter the year, and we're driven largely by growth with existing antenna customers, successful expansion of our distribution channels, and the introduction of new products. As shared in our press release in the fourth quarter, we achieved $26 million in revenue, $3.1 million in adjusted EBITDA, and $0.12 in non-GAAP earnings per share, all sequential improvements over the third quarter. We achieved non-GAAP gross margins of 46.6% for the quarter, a slight decrease from the third quarter, and just below the average for the year. Before I discuss our two product lines and growth initiatives for 2022, I want to mention the successful completion in the first quarter of the transition from our company-owned factory in Tianjin, China to contract manufacturers. This manufacturing transition that started in 2019 and was completed in this quarter eliminated significant fixed costs, and has already generated cost savings that have helped us offset increases in commodity prices, unfavorable currency exchange rates, and shipping costs. With the final closure of our factory in the first quarter, we expect net cost savings in 2022. It also reduces our operating risks and allows us to quickly expand our capacity given the ability of contract manufacturers to ramp up production when necessary. as was the case when several of our customers placed large orders this past year. 2022 growth initiatives of our two product lines include evaluating and further developing our distribution channels and launching new products, including 5G tools, industrial IoT radio products, and antenna platforms. From a regional perspective, the business in the U.S. remains strong. Our team in Asia is doing an excellent job winning new customers for existing antenna products and test and measurement tools, and our presence in Europe is growing. Smart Tech, by all measures, has been a successful acquisition, and it has added antenna products for new applications, such as electric vehicle charging stations, cargo tracking, and material handling. The Smart Tech team exceeded their financial goals for the year and have successfully navigated the supply chain and logistics issues to provide a high level of service to customers. There's a talented team, and we're glad they're part of PCTel. Together, we launched four new antenna platforms and secured key design wins in metering, cargo tracking, and rail. Our large OEMs in the utilities, agriculture, industrial, public safety, and Wi-Fi markets had strong growth in 2021, and we anticipate significant opportunities through OEM channels and our antenna products in 2022. PCTel has one of the broadest antenna and device portfolios to serve our target markets, including those just mentioned, plus smart transportation, metering, and rail. Our extensive product portfolio is attractive for distributors, and we added five strategic channel partners in 2021 to expand our market reach. On the test and measurement front, we're very excited about the launch of our new G-Flex scanning receiver for both 5G cellular and broader government applications, such as signal intelligence. This product is the most advanced scanning receiver on the market. The G Flex has functionality and performance in a compact unit that is equivalent to operating four to six of our competitor scanning receivers simultaneously. We announced the product at the end of the third quarter, and within the fourth quarter, we delivered G Flex to the leading operators around the world. The deployment of 5G networks continues with just over 25% of the global operators launching 5G mobile services by the end of 2021. Approximately 70% of the global operators are in an investing stage for 5G deployments, which may include spectrum auctions, trials, and planning for deployment. Despite pandemic-related slowdowns for spectrum auctions and rollouts in Europe and parts of Southeast Asia, 5G deployments continue to grow, driving the demand for high-performance scanning receivers like our G Flex. In addition to our strong antenna sales and public safety markets, We have expanded our market for scanning receiver solutions to address critical communication networks, including public safety. Our public safety scanning receiver solution based on the IBflex product ensures the quality of in-building wireless communications for first responders. We perform well in the public safety market by selling through distributors and across 140 certified engineering service companies in the U.S., which can be found on our website. In the second half of 2021, we launched Seahawk Central, which is our cloud-based test management, storage, and analytics platform for public safety network applications. This subscription-based service allows stakeholders, including engineering service companies, building owners, and government jurisdictions, to easily manage the collection process and access final reports through an online map-based portal. In addition to organic growth, we continue to evaluate acquisitions as an important component of our long-term growth strategy for the company. We believe there will be opportunities to grow PCTel through adding complementary products and markets in new regions. With that, I will now turn the call over to Kevin for a closer look at our fourth quarter and a discussion of the financials. Kevin?