PCTEL, Inc.

Welcome to the PCTEL first quarter 2022 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 first quarter 2022 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 PCPEL'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 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. Good afternoon and thank you for joining us. We're pleased to report year-over-year revenue growth for the first quarter of 2022. As you may recall, we had record-setting backlog at the end of 2021. About half of that converted to revenue in the first quarter while we maintain a healthy backlog with additional incoming orders. In the first quarter, demand increased from our larger OEM customers We secured new design wins, orders from stocking distributors grew, and we added new general market products to our product pipeline for release later this year. Our team continues to do an excellent job in managing supply chain disruptions and increased transportation costs. We've started to see nominal improvements both in transit times and shipping fees, although they both are considerably higher than before the pandemic. In today's call, we will share a summary of the first quarter, discuss our product launches and design wins, and share our view of trends in our market segments, all of which give us optimism for annual and long-term growth. As you may have seen in our press release issued after market close, we achieved 27% growth year-over-year in revenue from $17.7 million in the first quarter of 2021 to $22.5 million in 2022, which includes 2.6 million in contributions from Smart Tech Wireless, an acquisition that closed in April 2021. We remain profitable with non-GAAP earnings per share of two cents in the quarter, better by one cent compared to the same period in 2021, despite the product mix being more heavily weighted towards antenna sales and the increased costs of freight, logistics, and raw materials. Our lower non-GAAP margin percentage of 41.8% primarily reflects the higher revenue mix of antennas and industrial IoT devices relative to the higher margin scanning receivers. Overall, we believe general market conditions are improving based on the increased demand from our OEMs and major distributors from our antenna products. We were able to resume limited travel in the first quarter to visit our offices, meet with customers, and attend several important trade shows. Although there are still global challenges that require our attention, including supply chain disruptions, recently expanded COVID shutdowns in China, and the war in Europe, I'm pleased with how the team has managed our business to maintain a high level of service for our customers. Given the information we have today regarding product opportunities and the market conditions, we expect to see quarterly sequential revenue increases for the remainder of the year. We launched three new antenna programs in the first quarter of 2022 to expand penetration of our most popular antenna solutions into existing and new markets. We assigned new resources to work exclusively on these three initiatives and are expecting to see results starting in the second half of 2022 that will drive long-term growth. In the shorter term, we were awarded an important design win with a European luxury automobile manufacturer for smart tech embedded antenna. We delivered prototypes for a multi-mode complex antenna for rail applications that we anticipate shipping in larger quantities this year, and we launched two new 5G antennas for rail, enterprise, and utility applications in a quarter. EV, or electric vehicle, charging stations continue to be an important market for the company, with demand and orders increasing in Europe for our smart tech antennas. We believe these EV antenna solutions will be popular in the U.S. market as well, and they will contribute to revenue this year. The Smart Tech antenna portfolio, combined with PcTel's new platforms, create one of the largest antenna portfolios in the industry for vehicular, industrial IoT, and broader 5G and Wi-Fi 6E applications. Our broad product portfolio enables us to support a larger number of distributors and efficiently introduce PcTel products to new clients. With the addition of more than five new strategic distributors over the past two years, we have increased our reach and sales leverage to provide an important long-term growth driver for our business. Additional growth drivers for our test and measurement business include 5G deployments and signal intelligence for government applications. Our 5G scanning receiver, the G Flex, is designed to test multi-technology cellular networks and more advanced signal intelligence applications for government entities. New 5G networks launches continue, albeit at a slower pace over the past two years due to the pandemic. As of February of this year, approximately 40% of the operators deployed a 5G mobile system. Spectrum Auction Awards have resumed and will continue through the year for many of the remaining global markets planning to deploy 5G on newly available spectrum. Once awarded, deployments will require 5G test and measurement tools like our G Flex with an enhanced scanning performance to test both public cellular and private 5G wireless networks. Private 5G networks are ideal for businesses that have applications requiring ultra-low latency, high reliability, and security, such as automated mobile robotics, self-driving machines, and managing collective intelligence across many, sometimes thousands, of devices. We believe our expertise in test and measurement tools, along with our antenna systems, position the company well to support private 5G deployments and the ongoing maintenance for this expanding market. In addition to providing testing solutions for the cellular markets, our scanning receivers have become an integral part of testing public safety networks for both in-building and outdoor networks. In March, we announced the availability of our automated uplink testing capabilities as part of a wider initiative to test and monitor both downlink and uplink spectrum for public safety and critical communication infrastructure. This testing capability is important because the uplink signal transmitted power is a small fraction of the downlink power and thus is more susceptible to interference and blocking from building materials. PC-TEL's uplink testing solution is an upgrade to our market-leading public safety in-building tools based on our IBFlex that tests the downlink. This testing solution is used by approximately 140 certified public safety testers in the United States. This is an increase in the number of testing companies of about 40% over the past year. The uplink and downlink tests are fully supported by our Seahawk central platform, currently used by testing organizations, building owners, and jurisdictions responsible for ensuring the safety of first responders. PCTel has the most comprehensive public safety solution for this important testing application that is critical to keep first responders safe. The majority of our business is in the U.S., and we are leaders in providing test and measurement tools and antennas for cellular, 4G, 5G, GNSS, and Wi-Fi technologies across attractive markets, including industrial IOT, fleet, agriculture, rail, timing, and public safety. In addition to organic growth initiatives, we continue to evaluate strategic acquisitions that complement our product lines and expand our global reach with a focus on Europe. With that, I'll now turn the call over to Kevin for a closer look at our first quarter and a discussion on the financials.