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Hibernia Energy III, LLC Announces Partnership with NGP

HOUSTON–(BUSINESS WIRE)–Hibernia Energy III, LLC (“Hibernia III”) is pleased to announce it has raised $250 million of new equity commitments from NGP through NGP Natural Resources XII, L.P., the most recent NGP private equity fund focused on natural resources. In addition to the commitment from NGP, Hibernia management and members will be committing in excess of $21 million in equity. Hibernia III’s strategy is to acquire and prudently develop unconventional oil and gas assets in Texas, leveraging its proprietary relationships and operational expertise. The Houston, Texas based Hibernia team previously acquired, operated and developed assets in Martin County, Texas within the Midland Basin, divesting assets to both Athlon Energy and Eagle Energy Trust.

Hibernia III is led by P. Embry Canterbury, Sean Keenan and John Blevins. Embry previously co-founded Hibernia Energy, LLC (“Hibernia I”) and Hibernia Energy II, LLC (“Hibernia II”), which originally partnered with NGP in July 2010 and May 2013. Embry will be joined by Sean Keenan and John Blevins who will act as CFO and COO, respectively. Additional management team members have served in various roles at Permian-focused companies as reservoir engineers, operations engineers, geologists and land and business development managers. Carl Carter III, who co-founded Hibernia I and II, will act as a Strategic Advisor to the Hibernia III team. The senior management team has developed a strong track record in the Permian and other unconventional basins throughout the United States and brings 60+ years of industry experience to Hibernia III.

P. Embry Canterbury, CEO of Hibernia III, commented, “After two successful partnerships in the Midland Basin, we are excited to again be working with NGP on building another oil and gas company focused on creating significant value for our partners and team members. We believe there are tremendous opportunities in today’s market to acquire, develop, and realize value in multiple, unconventional resources and we have assembled a best-in-class team to execute this strategy.”

“NGP is excited and grateful to partner with the Hibernia III team,” Patrick McWilliams, Partner at NGP, said. “We are thrilled to get to work again with such an energetic, disciplined and skilled company and could not be happier to continue the partnership. We have known Embry and the Hibernia III team for years, and respect the dynamic culture, top-tier operating capabilities, and deep local relationships that will make Hibernia III truly successful.”

For more information about Hibernia III, please visit www.hiberniaresources.com.

About NGP

Founded in 1988, NGP is a premier private equity firm in the natural resources industry with approximately $17 billion of cumulative equity commitments organized to make strategic investments in the energy and natural resources sectors.

For more information about NGP, please visit www.ngpenergycapital.com.

Hibernia Energy III, LLC Announces Partnership with NGP

HOUSTON–(BUSINESS WIRE)–Hibernia Energy III, LLC (“Hibernia III”) is pleased to announce it has raised $250 million of new equity commitments from NGP through NGP Natural Resources XII, L.P., the most recent NGP private equity fund focused on natural resources. In addition to the commitment from NGP, Hibernia management and members will be committing in excess of $21 million in equity. Hibernia III’s strategy is to acquire and prudently develop unconventional oil and gas assets in Texas, leveraging its proprietary relationships and operational expertise. The Houston, Texas based Hibernia team previously acquired, operated and developed assets in Martin County, Texas within the Midland Basin, divesting assets to both Athlon Energy and Eagle Energy Trust.

Hibernia III is led by P. Embry Canterbury, Sean Keenan and John Blevins. Embry previously co-founded Hibernia Energy, LLC (“Hibernia I”) and Hibernia Energy II, LLC (“Hibernia II”), which originally partnered with NGP in July 2010 and May 2013. Embry will be joined by Sean Keenan and John Blevins who will act as CFO and COO, respectively. Additional management team members have served in various roles at Permian-focused companies as reservoir engineers, operations engineers, geologists and land and business development managers. Carl Carter III, who co-founded Hibernia I and II, will act as a Strategic Advisor to the Hibernia III team. The senior management team has developed a strong track record in the Permian and other unconventional basins throughout the United States and brings 60+ years of industry experience to Hibernia III.

P. Embry Canterbury, CEO of Hibernia III, commented, “After two successful partnerships in the Midland Basin, we are excited to again be working with NGP on building another oil and gas company focused on creating significant value for our partners and team members. We believe there are tremendous opportunities in today’s market to acquire, develop, and realize value in multiple, unconventional resources and we have assembled a best-in-class team to execute this strategy.”

“NGP is excited and grateful to partner with the Hibernia III team,” Patrick McWilliams, Partner at NGP, said. “We are thrilled to get to work again with such an energetic, disciplined and skilled company and could not be happier to continue the partnership. We have known Embry and the Hibernia III team for years, and respect the dynamic culture, top-tier operating capabilities, and deep local relationships that will make Hibernia III truly successful.”

For more information about Hibernia III, please visit www.hiberniaresources.com.

About NGP

Founded in 1988, NGP is a premier private equity firm in the natural resources industry with approximately $17 billion of cumulative equity commitments organized to make strategic investments in the energy and natural resources sectors.

For more information about NGP, please visit www.ngpenergycapital.com.

PCTEL Reports $21.5 Million in Second Quarter Revenue

BLOOMINGDALE, Ill.–(BUSINESS WIRE)–PCTEL, Inc. (NASDAQ: PCTI), a leader in Performance Critical TELecom solutions, announced its results for the second quarter and first half ended June 30, 2017.

The Company sold its engineering services operations in July. At June 30, 2017 the assets sold were classified as assets held for sale and the services operations are accounted for as discontinued operations.

Highlights From Continuing Operations

  • Revenue of $21.5 million in the second quarter and $44.5 million in the first half, a 1% increase in the quarter and a 10% increase in the half compared to last year. Connected Solutions revenue was up 7% in the quarter and 12% in the half. RF Solutions was down 16% in the quarter and up 3% in the half.
  • Gross profit margin of 41.7% in the second quarter and 41.4% in the first half, down 20 basis points in the quarter and up 90 basis points in the half compared to last year.
  • Net loss per share of $0.01 in the second quarter and break even in the first half, compared to a net loss of $0.49 per share in the quarter and $0.52 in the half last year.
  • Non-GAAP net income and adjusted EBITDA are measures the company uses to reflect the results of its core earnings. A reconciliation of those non-GAAP measures to our financial statements is provided later in the press release.
  • Non-GAAP net income of $0.05 per share in the second quarter and $0.10 in the first half compared to net income of $0.08 in the quarter and the half last year.
  • Adjusted EBITDA margin as a percent of revenue of 8% in the second quarter and the first half compared to 10% in the quarter and 7% in the half last year.
  • $34.2 million of cash and short-term investments at June 30, 2017. The Company generated free cash flow (cash flow from operations less capital spending) of approximately $2.0 million in the quarter and $2.9 million in the half.

“We are pleased to see continued antenna revenue growth in small cell, fleet, and utilities markets. Consistent with the Company’s investment thesis, antennas drove growth while RF Test tools generated profitable revenue,” said David Neumann, PCTEL’s CEO. “The recent sale of our non-core engineering services operation allows us to concentrate on our mission of being a best in class RF products company.”

CONFERENCE CALL / WEBCAST

PCTEL’s management team will discuss the Company’s results today at 5:15 p.m. ET. The call can be accessed by dialing (888) 782-2072 (U.S. / Canada) or (706) 679-6397 (International), conference ID: 47850677. The call will also be webcast at http://investor.pctel.com/events.cfm.

REPLAY: A replay will be available for two weeks after the call on either the website listed above or by calling (855) 859-2056 (U.S./Canada), or International (404) 537-3406, conference ID: 47850677.

About PCTEL

PCTEL delivers Performance Critical TELecom technology solutions to the wireless industry. We are a leading global supplier of antennas and wireless network testing solutions. PCTEL Connected Solutions designs and manufactures precision antennas. PCTEL antennas are deployed in small cells, enterprise Wi-Fi access points, fleet management and transit systems, and in equipment and devices for the Industrial Internet of Things (IIoT). PCTEL RF Solutions provides test tools that improve the performance of wireless networks globally. Mobile operators, neutral hosts, and equipment manufacturers rely on PCTEL’s scanning receivers and testing solutions to analyze, design, and optimize next generation wireless networks.

For more information, please visit the following websites.
PCTEL Corporate: http://www.pctel.com/
PCTEL Connected Solutions: http://www.antenna.com/
PCTEL RF Solutions: http://rfsolutions.pctel.com/

PCTEL Safe Harbor Statement

This press release and our related comments in our earnings conference call contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Specifically, the statements regarding our future financial performance, growth of our Connected Solutions and RF Solutions businesses, anticipated demand for certain products, including antennas for small cell, enterprise WiFi, IoT and FirstNet applications, and the impact of the divestiture of our engineering services assets are forward-looking statements within the meaning of the safe harbor. These statements are based on management’s current expectations and actual results may differ materially from those projected as a result of certain risks and uncertainties, including the actual growth in the APAC region, impact of data densification and IoT on capacity and coverage demand, impact of 5G, customer demand for these types of products and services generally, growth and continuity in PCTEL’s vertical markets, and PCTEL’s ability to grow its wireless products business and create, protect and implement new technologies and solutions. These and other risks and uncertainties are detailed in PCTEL’s Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and PCTEL disclaims any obligation to update or revise the information contained in any forward-looking statement, whether as a result of new information, future events or otherwise.

 
PCTEL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
   
(unaudited)
June 30, December 31,
2017 2016
ASSETS
 
Cash and cash equivalents $ 11,875 $ 14,855
Short-term investment securities 22,340 18,456
Accounts receivable, net of allowance for doubtful accounts of $257 and $273 at
June 30, 2017 and December 31, 2016, respectively 17,735 19,101
Inventories, net 13,783 14,442
Prepaid expenses and other assets 1,365 1,498
Current assets held for sale   694     50  
Total current assets 67,792 68,402
Property and equipment, net 12,310 11,796
Goodwill 3,332 3,332
Intangible assets, net 2,694 3,275
Deferred tax assets, net 5,647 4,512
Other noncurrent assets 83 36
Non-current assets held for sale   0     813  
TOTAL ASSETS $ 91,858   $ 92,166  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Accounts payable $ 6,009 $ 6,073
Accrued liabilities   6,300     7,177  
Total current liabilities 12,309 13,250
 
Other long-term liabilities 472 391
   
Total liabilities   12,781     13,641  
 
Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 17,791,498 and 17,335,122
shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively 18 17
Additional paid-in capital 134,748 134,480
Accumulated deficit (55,463 ) (55,590 )
Accumulated other comprehensive loss   (226 )   (382 )
Total stockholders’ equity   79,077     78,525  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 91,858   $ 92,166  
 
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
         
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
 
REVENUES $ 21,501 $ 21,308 $ 44,471 $ 40,491
COST OF REVENUES   12,539     12,374     26,055     24,097  
GROSS PROFIT   8,962     8,934     18,416     16,394  
OPERATING EXPENSES:
Research and development 2,667 2,523 5,383 5,130
Sales and marketing 2,912 3,090 6,165 5,954
General and administrative 3,598 3,256 6,937 6,185
Amortization of intangible assets 124 129 248 284
Restructuring expenses   0     22     0     216  
Total operating expenses   9,301     9,020     18,733     17,769  
OPERATING LOSS (339 ) (86 ) (317 ) (1,375 )
Other income, net   14     8     42     14  
LOSS BEFORE INCOME TAXES (325 ) (78 ) (275 ) (1,361 )
(Benefit) expense for income taxes   (140 )   7,703     (274 )   6,957  
NET LOSS FROM CONTINUING OPERATIONS (185 ) (7,781 ) (1 ) (8,318 )
NET LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT   (168 )   (3,292 )   (382 )   (4,211 )
NET LOSS $ (353 ) $ (11,073 )   (383 ) $ (12,529 )
 
Net Loss per Share From Continuing Operations:
Basic $ (0.01 ) $ (0.49 ) $ (0.00 ) $ (0.52 )
Diluted $ (0.01 ) $ (0.49 ) $ (0.00 ) $ (0.52 )
 
Net Loss per Share From Discontinued Operations:
Basic $ (0.01 ) $ (0.21 ) $ (0.02 ) $ (0.26 )
Diluted $ (0.01 ) $ (0.21 ) $ (0.02 ) $ (0.26 )
 
Net Loss per Share:
Basic $ (0.02 ) $ (0.69 ) $ (0.02 ) $ (0.78 )
Diluted $ (0.02 ) $ (0.69 ) $ (0.02 ) $ (0.78 )
 
Weighted Average Shares:
Basic 16,534 15,979 16,437 16,149
Diluted 16,534 15,979 16,437 16,149
 
Cash dividend per share $ 0.05 $ 0.05 $ 0.10 $ 0.10
 
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
   
Six Months Ended June 30,

 

2017 2016
 
Operating Activities:
Net loss from continuing operations $ (1 ) $ (8,318 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 1,262 1,319
Intangible asset amortization 581 618
Stock-based compensation 1,797 2,090
Loss on disposal/sale of property and equipment 3 5
Restructuring costs (58 ) 109
Deferred tax provision (423 ) 6,700
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 1,451 2,770
Inventories 779 2,325
Prepaid expenses and other assets 96 157
Accounts payable (232 ) (1,907 )
Income taxes payable (186 ) (54 )
Other accrued liabilities (694 ) (576 )
Deferred revenue   20     41  
Net cash provided by operating activities   4,395     5,279  
 
Investing Activities:
Capital expenditures (1,544 ) (1,268 )
Proceeds from disposal of property and equipment 0 1
Purchases of investments (23,071 ) (28,519 )
Redemptions/maturities of short-term investments   19,187     31,274  
Net cash (used in) provided by investing activities   (5,428 )   1,488  
 
Financing Activities:
Proceeds from issuance of common stock 867 350
Payments for repurchase of common stock 0 (4,095 )
Payment of withholding tax on stock-based compensation (692 ) (187 )
Principle payments on capital leases (41 ) (9 )
Cash dividends   (1,752 )   (1,723 )
Net cash used in financing activities   (1,618 )   (5,664 )
 
Cash flows from discontinued operations:
Net cash used in operating activities (349 ) (690 )
Net cash used in investing activities (16 ) (124 )
 
Net (decrease) increase in cash and cash equivalents (3,016 ) 289
Effect of exchange rate changes on cash 36 (39 )
Cash and cash equivalents, beginning of year   14,855     7,055  
Cash and Cash Equivalents, End of Period $ 11,875   $ 7,305  
 
PCTEL, INC.
P&L INFORMATION BY SEGMENT – Continuing Operations (unaudited)
(in thousands)
               
 
Three Months Ended June 30, 2017 Six Months Ended June 30, 2017

Connected
Solutions

RF Solutions Corporate Total

Connected
Solutions

RF Solutions Corporate Total
 
REVENUES $16,866 $4,661 ($26 ) $21,501 $34,137 $10,418 ($84 ) $44,471
               
GROSS PROFIT 5,731 3,223 8 8,962 11,135 7,270 11 18,416
               
OPERATING (LOSS) INCOME $2,349 $411 ($3,099 ) ($339 ) $4,095 $1,432 ($5,844 ) ($317 )
 
 
Three Months Ended June 30, 2016 Six Months Ended June 30, 2016

Connected
Solutions

RF Solutions Corporate Total

Connected
Solutions

RF Solutions Corporate Total
 
REVENUES $15,781 $5,572 ($45 ) $21,308 $30,480 $10,116 ($105 ) $40,491
               
GROSS PROFIT 4,941 3,983 10 8,934 9,265 7,122 7 16,394
               
OPERATING (LOSS) INCOME $1,792 $859 ($2,737 ) ($86 ) $3,094 $786 ($5,255 ) ($1,375 )
 

Reconciliation of GAAP to non-GAAP Results – Continuing Operations (unaudited)

(in thousands except per share information)
       

Reconciliation of GAAP operating loss to non-GAAP operating income – Continuing Operations (a)

 
Three Months Ended June 30, Six Months Ended June 30,

2017

2016

2017

2016

 
Operating Loss ($339 ) ($86 ) ($317 ) ($1,375 )
 
(a) Add:
Amortization of intangible assets
-Cost of revenues 167 167 333 333
-Operating expenses 124 129 248 284
Restructuring 0 22 0 216
TelWorx investigation:
-General & Administrative 0 (1 ) 0 5
Stock Compensation:
-Cost of revenues 72 73 133 141
-Engineering 120 175 266 342
-Sales & Marketing 126 161 246 301
-General & Administrative 770   892   1,152   1,306  
1,379   1,618   2,378   2,928  
Non-GAAP Operating Income $1,040   $1,532   $2,061   $1,553  
% of revenue 4.8 % 7.2 % 4.6 % 3.8 %
 

Reconciliation of GAAP net loss to non-GAAP net (loss) income – Continuing Operations (b)

 
Three Months Ended June 30, Six Months Ended June 30,

2017

2016

2017

2016

 
Net Loss ($185 ) ($7,781 ) ($1 ) ($8,318 )
 
Adjustments:
(a) Non-GAAP adjustment to operating loss 1,379 1,618 2,378 2,928
(b) Other income related to SEC investigation of TelWorx 0 1 0 (5 )
(b) Income Taxes (330 ) 7,426   (653 ) 6,676  
1,049   9,045   1,725   9,599  
Non-GAAP Net Income $864   $1,264   $1,724   $1,281  
 
Non-GAAP Earning per Share:
Basic $0.05 $0.08 $0.10 $0.08
Diluted $0.05 $0.08 $0.10 $0.08
 
Weighed Average Shares:
Basic 16,534 15,979 16,437 16,149
Diluted 17,015 15,979 16,921 16,312
 

This schedule reconciles the Company’s GAAP operating loss and GAAP net loss to its non-GAAP operating (loss) income and non-GAAP net (loss) income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results.

 

(a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the SEC investigation of TelWorx.

 

(b) These adjustments include the items described in footnote (a) as well as other income for insurance claims related to the SEC investigation of TelWorx, legal settlements, and non-cash income tax expense.

 

Reconciliation of GAAP to non-GAAP SEGMENT INFORMATION – Continuing Operations (unaudited) (a)

(in thousands)
                 
Three Months Ended June 30, 2017 Six Months Ended June 30, 2017

Connected
Solutions

RF
Solutions

Corporate Total

Connected
Solutions

RF
Solutions

Corporate Total
 
Operating (Loss) Income $2,349 $411 ($3,099 ) ($339 ) $4,095 $1,432 ($5,844 ) ($317 )
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 0 333 0 333
-Operating expenses 39 85 0 124 78 170 0 248
Stock Compensation:
-Cost of revenues 43 29 0 72 82 51 0 133
-Engineering 62 58 0 120 117 149 0 266
-Sales & Marketing 79 47 0 126 164 82 0 246
-General & Administrative 46   17   707     770   89   31   1,032     1,152  
269 403 707   1,379   530 816 1,032   2,378  
Non-GAAP Operating (Loss) Income $2,618 $814 ($2,392 ) $1,040   $4,625 $2,248 ($4,812 ) $2,061  
 
Three Months Ended June 30, 2016 Six Months Ended June 30, 2016

Connected
Solutions

RF
Solutions

Corporate Total

Connected
Solutions

RF
Solutions

Corporate Total
 
Operating (Loss) Income $1,792 $859 ($2,737 ) ($86 ) $3,094 $786 ($5,255 ) ($1,375 )
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 0 333 0 333
-Operating expenses 44 85 0 129 114 170 0 284
Restructuring expenses 0 5 17 22 44 99 73 216
TelWorx investigation:
-General & Administrative 0 0 (1 ) (1 ) 0 0 5 5
Stock Compensation:
-Cost of Goods Sold 43 30 0 73 84 57 0 141
-Engineering 30 145 0 175 72 270 0 342
-Sales & Marketing 113 48 0 161 200 101 0 301
-General & Administrative 52   95 745   892   92   165 1,049   1,306  
282 575 761   1,618   606 1,195 1,127   2,928  
Non-GAAP Operating (Loss) Income $2,074 $1,434 ($1,976 ) $1,532   $3,700 $1,981 ($4,128 ) $1,553  
 

This schedule reconciles the Company’s GAAP operating income (loss) by segment to its non-GAAP operating (loss) income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results.

 

(a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the SEC investigation of TelWorx.

 

PCTEL, Inc.

Reconciliation of GAAP operating loss to Adjusted EBITDA – Continuing Operations (a)

(in thousands)
           
 
Three Months Ended June 30, Six Months Ended June 30,

2017

2016

2017

2016

 
Operating Loss ($339 ) ($86 ) ($317 ) ($1,375 )
 
(a) Add:
Depreciation and amortization 633 659 1,262 1,319
Intangible amortization 291 296 581 617
Stock compensation expenses 1,088 1,301 1,797 2,090
Restructuring – operating expenses 0 22 0 216
TelWorx investigation- operating expenses 0   (1 ) 0   5  
Adjusted EBITDA $1,673   $2,191   $3,323   $2,872  
% of revenue 7.8 % 10.3 % 7.5 % 7.1 %
 

This schedule reconciles the Company’s GAAP operating loss to Adjusted EBITDA. The Company believes that this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses Adjusted EBITDA when evaluating its financial results as well as for internal planning and forecasting purposes. Adjusted EBITDA should not be viewed as a substitute for the Company’s GAAP results.

 

(a) Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization. These adjustments reflect depreciation, amortization of intangible assets, stock compensation expenses, restructuring expenses, and general and administrative expenses associated with the SEC investigation of TelWorx.

 

Restated GAAP Results – Continuing Operations (unaudited)

(in thousands except per share information)
                         
 
FY2015 FY2016 FY2017

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

 
 
REVENUES $23,158 $23,032 $22,393 $21,950 $19,183 $21,308 $20,892 $23,623 $22,970 $21,501
COST OF REVENUES 13,535 14,272 14,211 13,388 11,724 12,374 12,637 13,860 13,516 12,539
GROSS PROFIT 9,623 8,760 8,182 8,562 7,459 8,934 8,255 9,763 9,454 8,962
OPERATING EXPENSES:
Research and development 2,738 2,904 2,863 2,699 2,607 2,523 2,451 2,577 2,716 2,667
Sales and marketing 3,273 3,108 3,307 3,285 2,864 3,090 3,116 3,646 3,253 2,912
General and administrative 3,321 3,108 2,682 2,809 2,928 3,256 2,847 2,873 3,339 3,598
Amortization of intangible assets 435 558 470 441 155 129 124 124 124 124
Restructuring expenses 0     432     411     767   194     22     17       0     0  
Total operating expenses 9,767 10,110 9,733 10,001 8,748 9,020 8,555 9,220 9,432 9,301
OPERATING (LOSS) INCOME (144 ) (1,350 ) (1,551 ) (1,439 ) (1,289 ) (86 ) (300 ) 543 22 (339 )
Other income, net 44 2,205 534 504 6 8 35 63 28 14
(LOSS) INCOME BEFORE INCOME TAXES (100 ) 855 (1,017 ) (935 ) (1,283 )

 

(78 )

 

(265 ) 606 50

 

(325 )
Expense (benefit) for income taxes (36 )   303     (391 )   (333 ) (746 )   7,703     (354 )   5,173   (134 )   (140 )
NET (LOSS) INCOME FROM CONTINUING OPERATIONS (64 )   552     (626 )   (602 ) (537 )   (7,781 )   89     (4,567 ) 184     (185 )
NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS 31   171   203   304   (919 ) (3,292 ) 86   (760 ) (214 ) (168 )
NET (LOSS) INCOME ($33 ) $723   ($423 ) ($298 ) ($1,456 )

($11,073

)

$175   ($5,327 ) ($30 ) ($353 )
 
Earning per Share – Continuing Operations:
Basic ($0.00 ) $0.03 ($0.04 ) ($0.04 ) ($0.03 ) ($0.49 ) $0.01 ($0.28 ) $0.01 ($0.01 )
Diluted ($0.00 ) $0.03 ($0.04 ) ($0.04 ) ($0.03 ) ($0.49 ) $0.01 ($0.28 ) $0.01 ($0.01 )
 
Earning per Share – Discontinued Operations:
Basic $0.00 $0.01 $0.01 $0.02 ($0.06 ) ($0.21 ) $0.01 ($0.05 ) ($0.01 ) ($0.01 )
Diluted $0.00 $0.01 $0.01 $0.02 ($0.06 ) ($0.21 ) $0.01 ($0.05 ) ($0.01 ) ($0.01 )
 
Earning per Share:
Basic ($0.00 ) $0.04 ($0.02 ) ($0.02 ) ($0.09 ) ($0.69 ) $0.01 ($0.33 ) ($0.00 ) ($0.02 )
Diluted ($0.00 ) $0.04 ($0.02 ) ($0.02 ) ($0.09 ) ($0.69 ) $0.01 ($0.32 ) ($0.00 ) ($0.02 )
 
Weighed Average Shares:
Basic 18,312 18,257 17,626 16,820 16,324 15,979 16,106 16,194 16,340 16,534
Diluted 18,525 18,408 17,809 16,969 16,324 15,979 16,245 16,194 16,715 16,534
 

Reconciliation of GAAP to non-GAAP Results – Continuing Operations (unaudited)

(in thousands except per share information)
                       

Reconciliation of GAAP operating loss to non-GAAP operating income – Continuing Operations (a)

 
FY2015 FY2016 FY2017

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

 
Operating Income (Loss) ($100 ) ($1,350 ) ($1,017 ) ($1,439 ) ($1,289 ) ($86 ) ($300 ) $543 $22 ($339 )
 
(a) Add:
Amortization of intangible assets:
-Cost of revenues 20 241 167 167 167 167 167 167 166 167
-Operating expenses 435 558 470 441 155 129 124 124 124 124
Restructuring:
-Cost of revenues 0 114 132 42 0 0 0 0 0 0
-Operating expenses 0 432 411 767 194 22 17 0 0 0
TelWorx investigation:
-General & Administrative 38 54 9 7 5 (1 ) 0 0 0 0
Stock Compensation:
-Cost of revenues 52 80 64 54 68 73 78 63 61 72
-Engineering 115 31 99 175 167 175 183 125 147 120
-Sales & Marketing 151 (17 ) 220 (142 ) 140 161 176 140 119 126
-General & Administrative 153   171   203   304   414   892   541   451   382   770  
964   1,664   1,775   1,815   1,310   1,618   1,286   1,070   999   1,379  
Non-GAAP Operating Income $864   $314   $758   $376   $21   $1,532   $986   $1,613   $1,021   $1,040  
% of revenue 3.7 % 1.4 % 3.4 % 1.7 % 0.1 % 7.2 % 4.7 % 6.8 % 4.4 % 4.8 %
 

Reconciliation of GAAP net loss to non-GAAP net (loss) income – Continuing Operations (b)

 
FY2015 FY2016 FY2017

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

 
Net Income (Loss) ($64 ) $552 ($626 ) ($602 ) ($537 ) ($7,781 ) $89 ($4,567 ) $184 ($185 )
 
Adjustments:
(a) Non-GAAP adjustment to operating loss 964 1,664 1,775 $ 1,815 1,310 1,618 1,286 1,070 999 1,379
(b) Other income related to SEC investigation of TelWorx (38 ) (54 ) (10 ) $ (1 ) (5 ) 1 0 0 0 0
Legal Settlement – Amendment to Nexgen APA 0 (2,160 ) (500 ) $ (500 ) 0 0 0 0 0 0
(b) Income Taxes (185 ) 248   (450 ) $ (401 ) (750 ) 7,426   (538 ) 4,871   (424 ) (330 )
741   (302 ) 815   $ 913   555   9,045   748   5,941   575   1,049  
Non-GAAP Net Income (Loss) $677   $250   $189   $ 311   $18   $1,264   $837   $1,374   $759   $864  
 
Non-GAAP Earning per Share:
Basic $0.04 $0.01 $0.01 $0.02 $0.00 $0.08 $0.05 $0.08 $0.05 $0.05
Diluted $0.04 $0.01 $0.01 $0.02 $0.00 $0.08 $0.05 $0.08 $0.05 $0.05
 
Weighed Average Shares:
Basic 18,312 18,257 17,626 16,820 16,324 15,979 16,106 16,194 16,340 16,340
Diluted 18,525 18,408 17,809 16,969 16,324 15,979 16,245 16,439 16,715 16,715
 

This schedule reconciles the Company’s GAAP operating loss and GAAP net loss to its non-GAAP operating (loss) income and non-GAAP net (loss) income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results.

 

(a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the SEC investigation of TelWorx.

 

(b) These adjustments include the items described in footnote (a) as well as other income for insurance claims related to the SEC investigation of TelWorx, legal settlements, and non-cash income tax expense.

 

PCTEL, Inc.

Reconciliation of GAAP operating loss to Adjusted EBITDA – Continuing Operations (a)

(in thousands)
                       
 
FY2015 FY2016 FY2017

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

 
Operating (Loss) Income ($144 )

($1,350

)

($1,551 ) ($1,439 ) ($1,289 ) ($86 ) ($300 ) $543 $22 ($339 )
 
(a) Add:
Depreciation and amortization 634 656 660 660 660 659 675 635 628 633
Intangible amortization 455 799 637 608 322 296 291 291 290 291
Stock compensation expenses 471 265 586 391 789 1,301 978 779 709 1,088
Restructuring – operating expenses 0 432 411 767 194 22 17 0 0 0
TelWorx investigation- operating expenses 38   54   9   7   5   (1 ) 0   0   0   0  
Adjusted EBITDA $1,454   $856   $752   $994   $681  

$2,191

  $1,661   $2,248   $1,649  

$1,673

 
% of revenue 6.3 % 3.7 % 3.4 % 4.5 % 3.6 % 10.3 % 8.0 % 9.5 % 7.2 % 7.3 %
 

This schedule reconciles the Company’s GAAP operating loss to Adjusted EBITDA. The Company believes that this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses Adjusted EBITDA when evaluating its financial results as well as for internal planning and forecasting purposes. Adjusted EBITDA should not be viewed as a substitute for the Company’s GAAP results.

 

(a) Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization. These adjustments reflect depreciation, amortization of intangible assets, stock compensation expenses, restructuring expenses, and general and administrative expenses associated with the SEC investigation of TelWorx.

 

PCTEL Reports $21.5 Million in Second Quarter Revenue

BLOOMINGDALE, Ill.–(BUSINESS WIRE)–PCTEL, Inc. (NASDAQ: PCTI), a leader in Performance Critical TELecom solutions, announced its results for the second quarter and first half ended June 30, 2017.

The Company sold its engineering services operations in July. At June 30, 2017 the assets sold were classified as assets held for sale and the services operations are accounted for as discontinued operations.

Highlights From Continuing Operations

  • Revenue of $21.5 million in the second quarter and $44.5 million in the first half, a 1% increase in the quarter and a 10% increase in the half compared to last year. Connected Solutions revenue was up 7% in the quarter and 12% in the half. RF Solutions was down 16% in the quarter and up 3% in the half.
  • Gross profit margin of 41.7% in the second quarter and 41.4% in the first half, down 20 basis points in the quarter and up 90 basis points in the half compared to last year.
  • Net loss per share of $0.01 in the second quarter and break even in the first half, compared to a net loss of $0.49 per share in the quarter and $0.52 in the half last year.
  • Non-GAAP net income and adjusted EBITDA are measures the company uses to reflect the results of its core earnings. A reconciliation of those non-GAAP measures to our financial statements is provided later in the press release.
  • Non-GAAP net income of $0.05 per share in the second quarter and $0.10 in the first half compared to net income of $0.08 in the quarter and the half last year.
  • Adjusted EBITDA margin as a percent of revenue of 8% in the second quarter and the first half compared to 10% in the quarter and 7% in the half last year.
  • $34.2 million of cash and short-term investments at June 30, 2017. The Company generated free cash flow (cash flow from operations less capital spending) of approximately $2.0 million in the quarter and $2.9 million in the half.

“We are pleased to see continued antenna revenue growth in small cell, fleet, and utilities markets. Consistent with the Company’s investment thesis, antennas drove growth while RF Test tools generated profitable revenue,” said David Neumann, PCTEL’s CEO. “The recent sale of our non-core engineering services operation allows us to concentrate on our mission of being a best in class RF products company.”

CONFERENCE CALL / WEBCAST

PCTEL’s management team will discuss the Company’s results today at 5:15 p.m. ET. The call can be accessed by dialing (888) 782-2072 (U.S. / Canada) or (706) 679-6397 (International), conference ID: 47850677. The call will also be webcast at http://investor.pctel.com/events.cfm.

REPLAY: A replay will be available for two weeks after the call on either the website listed above or by calling (855) 859-2056 (U.S./Canada), or International (404) 537-3406, conference ID: 47850677.

About PCTEL

PCTEL delivers Performance Critical TELecom technology solutions to the wireless industry. We are a leading global supplier of antennas and wireless network testing solutions. PCTEL Connected Solutions designs and manufactures precision antennas. PCTEL antennas are deployed in small cells, enterprise Wi-Fi access points, fleet management and transit systems, and in equipment and devices for the Industrial Internet of Things (IIoT). PCTEL RF Solutions provides test tools that improve the performance of wireless networks globally. Mobile operators, neutral hosts, and equipment manufacturers rely on PCTEL’s scanning receivers and testing solutions to analyze, design, and optimize next generation wireless networks.

For more information, please visit the following websites.
PCTEL Corporate: http://www.pctel.com/
PCTEL Connected Solutions: http://www.antenna.com/
PCTEL RF Solutions: http://rfsolutions.pctel.com/

PCTEL Safe Harbor Statement

This press release and our related comments in our earnings conference call contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Specifically, the statements regarding our future financial performance, growth of our Connected Solutions and RF Solutions businesses, anticipated demand for certain products, including antennas for small cell, enterprise WiFi, IoT and FirstNet applications, and the impact of the divestiture of our engineering services assets are forward-looking statements within the meaning of the safe harbor. These statements are based on management’s current expectations and actual results may differ materially from those projected as a result of certain risks and uncertainties, including the actual growth in the APAC region, impact of data densification and IoT on capacity and coverage demand, impact of 5G, customer demand for these types of products and services generally, growth and continuity in PCTEL’s vertical markets, and PCTEL’s ability to grow its wireless products business and create, protect and implement new technologies and solutions. These and other risks and uncertainties are detailed in PCTEL’s Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and PCTEL disclaims any obligation to update or revise the information contained in any forward-looking statement, whether as a result of new information, future events or otherwise.

 
PCTEL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
   
(unaudited)
June 30, December 31,
2017 2016
ASSETS
 
Cash and cash equivalents $ 11,875 $ 14,855
Short-term investment securities 22,340 18,456
Accounts receivable, net of allowance for doubtful accounts of $257 and $273 at
June 30, 2017 and December 31, 2016, respectively 17,735 19,101
Inventories, net 13,783 14,442
Prepaid expenses and other assets 1,365 1,498
Current assets held for sale   694     50  
Total current assets 67,792 68,402
Property and equipment, net 12,310 11,796
Goodwill 3,332 3,332
Intangible assets, net 2,694 3,275
Deferred tax assets, net 5,647 4,512
Other noncurrent assets 83 36
Non-current assets held for sale   0     813  
TOTAL ASSETS $ 91,858   $ 92,166  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Accounts payable $ 6,009 $ 6,073
Accrued liabilities   6,300     7,177  
Total current liabilities 12,309 13,250
 
Other long-term liabilities 472 391
   
Total liabilities   12,781     13,641  
 
Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 17,791,498 and 17,335,122
shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively 18 17
Additional paid-in capital 134,748 134,480
Accumulated deficit (55,463 ) (55,590 )
Accumulated other comprehensive loss   (226 )   (382 )
Total stockholders’ equity   79,077     78,525  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 91,858   $ 92,166  
 
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share data)
         
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
 
REVENUES $ 21,501 $ 21,308 $ 44,471 $ 40,491
COST OF REVENUES   12,539     12,374     26,055     24,097  
GROSS PROFIT   8,962     8,934     18,416     16,394  
OPERATING EXPENSES:
Research and development 2,667 2,523 5,383 5,130
Sales and marketing 2,912 3,090 6,165 5,954
General and administrative 3,598 3,256 6,937 6,185
Amortization of intangible assets 124 129 248 284
Restructuring expenses   0     22     0     216  
Total operating expenses   9,301     9,020     18,733     17,769  
OPERATING LOSS (339 ) (86 ) (317 ) (1,375 )
Other income, net   14     8     42     14  
LOSS BEFORE INCOME TAXES (325 ) (78 ) (275 ) (1,361 )
(Benefit) expense for income taxes   (140 )   7,703     (274 )   6,957  
NET LOSS FROM CONTINUING OPERATIONS (185 ) (7,781 ) (1 ) (8,318 )
NET LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT   (168 )   (3,292 )   (382 )   (4,211 )
NET LOSS $ (353 ) $ (11,073 )   (383 ) $ (12,529 )
 
Net Loss per Share From Continuing Operations:
Basic $ (0.01 ) $ (0.49 ) $ (0.00 ) $ (0.52 )
Diluted $ (0.01 ) $ (0.49 ) $ (0.00 ) $ (0.52 )
 
Net Loss per Share From Discontinued Operations:
Basic $ (0.01 ) $ (0.21 ) $ (0.02 ) $ (0.26 )
Diluted $ (0.01 ) $ (0.21 ) $ (0.02 ) $ (0.26 )
 
Net Loss per Share:
Basic $ (0.02 ) $ (0.69 ) $ (0.02 ) $ (0.78 )
Diluted $ (0.02 ) $ (0.69 ) $ (0.02 ) $ (0.78 )
 
Weighted Average Shares:
Basic 16,534 15,979 16,437 16,149
Diluted 16,534 15,979 16,437 16,149
 
Cash dividend per share $ 0.05 $ 0.05 $ 0.10 $ 0.10
 
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
   
Six Months Ended June 30,

 

2017 2016
 
Operating Activities:
Net loss from continuing operations $ (1 ) $ (8,318 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 1,262 1,319
Intangible asset amortization 581 618
Stock-based compensation 1,797 2,090
Loss on disposal/sale of property and equipment 3 5
Restructuring costs (58 ) 109
Deferred tax provision (423 ) 6,700
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 1,451 2,770
Inventories 779 2,325
Prepaid expenses and other assets 96 157
Accounts payable (232 ) (1,907 )
Income taxes payable (186 ) (54 )
Other accrued liabilities (694 ) (576 )
Deferred revenue   20     41  
Net cash provided by operating activities   4,395     5,279  
 
Investing Activities:
Capital expenditures (1,544 ) (1,268 )
Proceeds from disposal of property and equipment 0 1
Purchases of investments (23,071 ) (28,519 )
Redemptions/maturities of short-term investments   19,187     31,274  
Net cash (used in) provided by investing activities   (5,428 )   1,488  
 
Financing Activities:
Proceeds from issuance of common stock 867 350
Payments for repurchase of common stock 0 (4,095 )
Payment of withholding tax on stock-based compensation (692 ) (187 )
Principle payments on capital leases (41 ) (9 )
Cash dividends   (1,752 )   (1,723 )
Net cash used in financing activities   (1,618 )   (5,664 )
 
Cash flows from discontinued operations:
Net cash used in operating activities (349 ) (690 )
Net cash used in investing activities (16 ) (124 )
 
Net (decrease) increase in cash and cash equivalents (3,016 ) 289
Effect of exchange rate changes on cash 36 (39 )
Cash and cash equivalents, beginning of year   14,855     7,055  
Cash and Cash Equivalents, End of Period $ 11,875   $ 7,305  
 
PCTEL, INC.
P&L INFORMATION BY SEGMENT – Continuing Operations (unaudited)
(in thousands)
               
 
Three Months Ended June 30, 2017 Six Months Ended June 30, 2017

Connected
Solutions

RF Solutions Corporate Total

Connected
Solutions

RF Solutions Corporate Total
 
REVENUES $16,866 $4,661 ($26 ) $21,501 $34,137 $10,418 ($84 ) $44,471
               
GROSS PROFIT 5,731 3,223 8 8,962 11,135 7,270 11 18,416
               
OPERATING (LOSS) INCOME $2,349 $411 ($3,099 ) ($339 ) $4,095 $1,432 ($5,844 ) ($317 )
 
 
Three Months Ended June 30, 2016 Six Months Ended June 30, 2016

Connected
Solutions

RF Solutions Corporate Total

Connected
Solutions

RF Solutions Corporate Total
 
REVENUES $15,781 $5,572 ($45 ) $21,308 $30,480 $10,116 ($105 ) $40,491
               
GROSS PROFIT 4,941 3,983 10 8,934 9,265 7,122 7 16,394
               
OPERATING (LOSS) INCOME $1,792 $859 ($2,737 ) ($86 ) $3,094 $786 ($5,255 ) ($1,375 )
 

Reconciliation of GAAP to non-GAAP Results – Continuing Operations (unaudited)

(in thousands except per share information)
       

Reconciliation of GAAP operating loss to non-GAAP operating income – Continuing Operations (a)

 
Three Months Ended June 30, Six Months Ended June 30,

2017

2016

2017

2016

 
Operating Loss ($339 ) ($86 ) ($317 ) ($1,375 )
 
(a) Add:
Amortization of intangible assets
-Cost of revenues 167 167 333 333
-Operating expenses 124 129 248 284
Restructuring 0 22 0 216
TelWorx investigation:
-General & Administrative 0 (1 ) 0 5
Stock Compensation:
-Cost of revenues 72 73 133 141
-Engineering 120 175 266 342
-Sales & Marketing 126 161 246 301
-General & Administrative 770   892   1,152   1,306  
1,379   1,618   2,378   2,928  
Non-GAAP Operating Income $1,040   $1,532   $2,061   $1,553  
% of revenue 4.8 % 7.2 % 4.6 % 3.8 %
 

Reconciliation of GAAP net loss to non-GAAP net (loss) income – Continuing Operations (b)

 
Three Months Ended June 30, Six Months Ended June 30,

2017

2016

2017

2016

 
Net Loss ($185 ) ($7,781 ) ($1 ) ($8,318 )
 
Adjustments:
(a) Non-GAAP adjustment to operating loss 1,379 1,618 2,378 2,928
(b) Other income related to SEC investigation of TelWorx 0 1 0 (5 )
(b) Income Taxes (330 ) 7,426   (653 ) 6,676  
1,049   9,045   1,725   9,599  
Non-GAAP Net Income $864   $1,264   $1,724   $1,281  
 
Non-GAAP Earning per Share:
Basic $0.05 $0.08 $0.10 $0.08
Diluted $0.05 $0.08 $0.10 $0.08
 
Weighed Average Shares:
Basic 16,534 15,979 16,437 16,149
Diluted 17,015 15,979 16,921 16,312
 

This schedule reconciles the Company’s GAAP operating loss and GAAP net loss to its non-GAAP operating (loss) income and non-GAAP net (loss) income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results.

 

(a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the SEC investigation of TelWorx.

 

(b) These adjustments include the items described in footnote (a) as well as other income for insurance claims related to the SEC investigation of TelWorx, legal settlements, and non-cash income tax expense.

 

Reconciliation of GAAP to non-GAAP SEGMENT INFORMATION – Continuing Operations (unaudited) (a)

(in thousands)
                 
Three Months Ended June 30, 2017 Six Months Ended June 30, 2017

Connected
Solutions

RF
Solutions

Corporate Total

Connected
Solutions

RF
Solutions

Corporate Total
 
Operating (Loss) Income $2,349 $411 ($3,099 ) ($339 ) $4,095 $1,432 ($5,844 ) ($317 )
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 0 333 0 333
-Operating expenses 39 85 0 124 78 170 0 248
Stock Compensation:
-Cost of revenues 43 29 0 72 82 51 0 133
-Engineering 62 58 0 120 117 149 0 266
-Sales & Marketing 79 47 0 126 164 82 0 246
-General & Administrative 46   17   707     770   89   31   1,032     1,152  
269 403 707   1,379   530 816 1,032   2,378  
Non-GAAP Operating (Loss) Income $2,618 $814 ($2,392 ) $1,040   $4,625 $2,248 ($4,812 ) $2,061  
 
Three Months Ended June 30, 2016 Six Months Ended June 30, 2016

Connected
Solutions

RF
Solutions

Corporate Total

Connected
Solutions

RF
Solutions

Corporate Total
 
Operating (Loss) Income $1,792 $859 ($2,737 ) ($86 ) $3,094 $786 ($5,255 ) ($1,375 )
Add:
Amortization of intangible assets:
-Cost of revenues 0 167 0 167 0 333 0 333
-Operating expenses 44 85 0 129 114 170 0 284
Restructuring expenses 0 5 17 22 44 99 73 216
TelWorx investigation:
-General & Administrative 0 0 (1 ) (1 ) 0 0 5 5
Stock Compensation:
-Cost of Goods Sold 43 30 0 73 84 57 0 141
-Engineering 30 145 0 175 72 270 0 342
-Sales & Marketing 113 48 0 161 200 101 0 301
-General & Administrative 52   95 745   892   92   165 1,049   1,306  
282 575 761   1,618   606 1,195 1,127   2,928  
Non-GAAP Operating (Loss) Income $2,074 $1,434 ($1,976 ) $1,532   $3,700 $1,981 ($4,128 ) $1,553  
 

This schedule reconciles the Company’s GAAP operating income (loss) by segment to its non-GAAP operating (loss) income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results.

 

(a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the SEC investigation of TelWorx.

 

PCTEL, Inc.

Reconciliation of GAAP operating loss to Adjusted EBITDA – Continuing Operations (a)

(in thousands)
           
 
Three Months Ended June 30, Six Months Ended June 30,

2017

2016

2017

2016

 
Operating Loss ($339 ) ($86 ) ($317 ) ($1,375 )
 
(a) Add:
Depreciation and amortization 633 659 1,262 1,319
Intangible amortization 291 296 581 617
Stock compensation expenses 1,088 1,301 1,797 2,090
Restructuring – operating expenses 0 22 0 216
TelWorx investigation- operating expenses 0   (1 ) 0   5  
Adjusted EBITDA $1,673   $2,191   $3,323   $2,872  
% of revenue 7.8 % 10.3 % 7.5 % 7.1 %
 

This schedule reconciles the Company’s GAAP operating loss to Adjusted EBITDA. The Company believes that this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses Adjusted EBITDA when evaluating its financial results as well as for internal planning and forecasting purposes. Adjusted EBITDA should not be viewed as a substitute for the Company’s GAAP results.

 

(a) Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization. These adjustments reflect depreciation, amortization of intangible assets, stock compensation expenses, restructuring expenses, and general and administrative expenses associated with the SEC investigation of TelWorx.

 

Restated GAAP Results – Continuing Operations (unaudited)

(in thousands except per share information)
                         
 
FY2015 FY2016 FY2017

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

 
 
REVENUES $23,158 $23,032 $22,393 $21,950 $19,183 $21,308 $20,892 $23,623 $22,970 $21,501
COST OF REVENUES 13,535 14,272 14,211 13,388 11,724 12,374 12,637 13,860 13,516 12,539
GROSS PROFIT 9,623 8,760 8,182 8,562 7,459 8,934 8,255 9,763 9,454 8,962
OPERATING EXPENSES:
Research and development 2,738 2,904 2,863 2,699 2,607 2,523 2,451 2,577 2,716 2,667
Sales and marketing 3,273 3,108 3,307 3,285 2,864 3,090 3,116 3,646 3,253 2,912
General and administrative 3,321 3,108 2,682 2,809 2,928 3,256 2,847 2,873 3,339 3,598
Amortization of intangible assets 435 558 470 441 155 129 124 124 124 124
Restructuring expenses 0     432     411     767   194     22     17       0     0  
Total operating expenses 9,767 10,110 9,733 10,001 8,748 9,020 8,555 9,220 9,432 9,301
OPERATING (LOSS) INCOME (144 ) (1,350 ) (1,551 ) (1,439 ) (1,289 ) (86 ) (300 ) 543 22 (339 )
Other income, net 44 2,205 534 504 6 8 35 63 28 14
(LOSS) INCOME BEFORE INCOME TAXES (100 ) 855 (1,017 ) (935 ) (1,283 )

 

(78 )

 

(265 ) 606 50

 

(325 )
Expense (benefit) for income taxes (36 )   303     (391 )   (333 ) (746 )   7,703     (354 )   5,173   (134 )   (140 )
NET (LOSS) INCOME FROM CONTINUING OPERATIONS (64 )   552     (626 )   (602 ) (537 )   (7,781 )   89     (4,567 ) 184     (185 )
NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS 31   171   203   304   (919 ) (3,292 ) 86   (760 ) (214 ) (168 )
NET (LOSS) INCOME ($33 ) $723   ($423 ) ($298 ) ($1,456 )

($11,073

)

$175   ($5,327 ) ($30 ) ($353 )
 
Earning per Share – Continuing Operations:
Basic ($0.00 ) $0.03 ($0.04 ) ($0.04 ) ($0.03 ) ($0.49 ) $0.01 ($0.28 ) $0.01 ($0.01 )
Diluted ($0.00 ) $0.03 ($0.04 ) ($0.04 ) ($0.03 ) ($0.49 ) $0.01 ($0.28 ) $0.01 ($0.01 )
 
Earning per Share – Discontinued Operations:
Basic $0.00 $0.01 $0.01 $0.02 ($0.06 ) ($0.21 ) $0.01 ($0.05 ) ($0.01 ) ($0.01 )
Diluted $0.00 $0.01 $0.01 $0.02 ($0.06 ) ($0.21 ) $0.01 ($0.05 ) ($0.01 ) ($0.01 )
 
Earning per Share:
Basic ($0.00 ) $0.04 ($0.02 ) ($0.02 ) ($0.09 ) ($0.69 ) $0.01 ($0.33 ) ($0.00 ) ($0.02 )
Diluted ($0.00 ) $0.04 ($0.02 ) ($0.02 ) ($0.09 ) ($0.69 ) $0.01 ($0.32 ) ($0.00 ) ($0.02 )
 
Weighed Average Shares:
Basic 18,312 18,257 17,626 16,820 16,324 15,979 16,106 16,194 16,340 16,534
Diluted 18,525 18,408 17,809 16,969 16,324 15,979 16,245 16,194 16,715 16,534
 

Reconciliation of GAAP to non-GAAP Results – Continuing Operations (unaudited)

(in thousands except per share information)
                       

Reconciliation of GAAP operating loss to non-GAAP operating income – Continuing Operations (a)

 
FY2015 FY2016 FY2017

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

 
Operating Income (Loss) ($100 ) ($1,350 ) ($1,017 ) ($1,439 ) ($1,289 ) ($86 ) ($300 ) $543 $22 ($339 )
 
(a) Add:
Amortization of intangible assets:
-Cost of revenues 20 241 167 167 167 167 167 167 166 167
-Operating expenses 435 558 470 441 155 129 124 124 124 124
Restructuring:
-Cost of revenues 0 114 132 42 0 0 0 0 0 0
-Operating expenses 0 432 411 767 194 22 17 0 0 0
TelWorx investigation:
-General & Administrative 38 54 9 7 5 (1 ) 0 0 0 0
Stock Compensation:
-Cost of revenues 52 80 64 54 68 73 78 63 61 72
-Engineering 115 31 99 175 167 175 183 125 147 120
-Sales & Marketing 151 (17 ) 220 (142 ) 140 161 176 140 119 126
-General & Administrative 153   171   203   304   414   892   541   451   382   770  
964   1,664   1,775   1,815   1,310   1,618   1,286   1,070   999   1,379  
Non-GAAP Operating Income $864   $314   $758   $376   $21   $1,532   $986   $1,613   $1,021   $1,040  
% of revenue 3.7 % 1.4 % 3.4 % 1.7 % 0.1 % 7.2 % 4.7 % 6.8 % 4.4 % 4.8 %
 

Reconciliation of GAAP net loss to non-GAAP net (loss) income – Continuing Operations (b)

 
FY2015 FY2016 FY2017

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

 
Net Income (Loss) ($64 ) $552 ($626 ) ($602 ) ($537 ) ($7,781 ) $89 ($4,567 ) $184 ($185 )
 
Adjustments:
(a) Non-GAAP adjustment to operating loss 964 1,664 1,775 $ 1,815 1,310 1,618 1,286 1,070 999 1,379
(b) Other income related to SEC investigation of TelWorx (38 ) (54 ) (10 ) $ (1 ) (5 ) 1 0 0 0 0
Legal Settlement – Amendment to Nexgen APA 0 (2,160 ) (500 ) $ (500 ) 0 0 0 0 0 0
(b) Income Taxes (185 ) 248   (450 ) $ (401 ) (750 ) 7,426   (538 ) 4,871   (424 ) (330 )
741   (302 ) 815   $ 913   555   9,045   748   5,941   575   1,049  
Non-GAAP Net Income (Loss) $677   $250   $189   $ 311   $18   $1,264   $837   $1,374   $759   $864  
 
Non-GAAP Earning per Share:
Basic $0.04 $0.01 $0.01 $0.02 $0.00 $0.08 $0.05 $0.08 $0.05 $0.05
Diluted $0.04 $0.01 $0.01 $0.02 $0.00 $0.08 $0.05 $0.08 $0.05 $0.05
 
Weighed Average Shares:
Basic 18,312 18,257 17,626 16,820 16,324 15,979 16,106 16,194 16,340 16,340
Diluted 18,525 18,408 17,809 16,969 16,324 15,979 16,245 16,439 16,715 16,715
 

This schedule reconciles the Company’s GAAP operating loss and GAAP net loss to its non-GAAP operating (loss) income and non-GAAP net (loss) income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results.

 

(a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the SEC investigation of TelWorx.

 

(b) These adjustments include the items described in footnote (a) as well as other income for insurance claims related to the SEC investigation of TelWorx, legal settlements, and non-cash income tax expense.

 

PCTEL, Inc.

Reconciliation of GAAP operating loss to Adjusted EBITDA – Continuing Operations (a)

(in thousands)
                       
 
FY2015 FY2016 FY2017

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

 
Operating (Loss) Income ($144 )

($1,350

)

($1,551 ) ($1,439 ) ($1,289 ) ($86 ) ($300 ) $543 $22 ($339 )
 
(a) Add:
Depreciation and amortization 634 656 660 660 660 659 675 635 628 633
Intangible amortization 455 799 637 608 322 296 291 291 290 291
Stock compensation expenses 471 265 586 391 789 1,301 978 779 709 1,088
Restructuring – operating expenses 0 432 411 767 194 22 17 0 0 0
TelWorx investigation- operating expenses 38   54   9   7   5   (1 ) 0   0   0   0  
Adjusted EBITDA $1,454   $856   $752   $994   $681  

$2,191

  $1,661   $2,248   $1,649  

$1,673

 
% of revenue 6.3 % 3.7 % 3.4 % 4.5 % 3.6 % 10.3 % 8.0 % 9.5 % 7.2 % 7.3 %
 

This schedule reconciles the Company’s GAAP operating loss to Adjusted EBITDA. The Company believes that this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses Adjusted EBITDA when evaluating its financial results as well as for internal planning and forecasting purposes. Adjusted EBITDA should not be viewed as a substitute for the Company’s GAAP results.

 

(a) Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization. These adjustments reflect depreciation, amortization of intangible assets, stock compensation expenses, restructuring expenses, and general and administrative expenses associated with the SEC investigation of TelWorx.

 

“Spirometer Market Analysis” Global Industry Analysis and Opportunity Assessment 2017 – 2022

The Global Spirometer Market Research Report provides a detailed market overview along with the analysis of industry’s gross margin, cost structure, consumption value and sale price. The key companies of the Global Spirometer market, manufacturers, distributors along with the latest development trends and Forecasts are detailed in the Report.

research report is a proven source of information which offers a telescopic view of the current market trends, situations, opportunities and status. Both established and new players in the Global Portable Spirometers industry can use this report for complete understanding of the market.

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Various key factors are discussed in the report, which will help the buyer in studying the Global Portable Spirometers market on competitive landscape analysis of prime manufacturers, trends, opportunities,marketing strategies analysis, Market Effect Factor Analysis and Consumer Needs by major regions, types, applications in Global market considering the past, present and future state of the Global Portable Spirometers industry.

The Global Spirometer market is mainly driven by rising incidence of respiratory diseases accompanied by technological advancements of spirometer devices worldwide. The market is expected to grow exponentially in the period of 2017 to 2022

The report  Spirometer  Market by Product (Hand-held, Table-top, Desktop), Technology (Volume Measurement, Flow Measurement, Peak Flow Meters), End-user (Hospital, Clinic, Homecare)

The major players involved in this report include CareFusion, Schiller, Philips Healthcare, Welch Allyn, Anhui Electronics Scientific Institute, CardioTech. M &B, Geratherm Respiratory, Fukuda Sangyo, Medisoft, and Thor Medical Systems, and others

Growing population and economies  in the developing countries such as India and China is expected to drive the growth of the spirometer market in Asia.  In addition,technological advancements such as combination of cell phones and spirometers, which enable doctors or hospitals to access data easily,and

telemedicine services, government activities for use of spirometer devices  and increasing incidences of chronic diseases are expected to create new opportunities  for the global spirometers market.

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K12 Inc. Reports Fiscal 2017 Revenue of $888.5 Million

HERNDON, Va.–(BUSINESS WIRE)–K12 Inc. (NYSE: LRN), a technology-based education company and leading provider of online curriculum and online school programs for students in pre-K through high school, today announced its results for the fourth fiscal quarter and full fiscal year ended June 30, 2017.

Financial Highlights for the Three Months Ended June 30, 2017 (Fourth Quarter Fiscal 2017)

  • Revenues of $215.8 million, compared to $221.3 million in the fourth quarter of FY 2016.
  • Operating income of $4.7 million, compared to $0.5 million in the fourth quarter of FY 2016.
  • Net loss attributable to common stockholders of $6.5 million, compared to a net loss of $1.0 million in the fourth quarter of FY 2016.
    • The net loss in the fourth quarter is due to a $10.0 million non-operating charge relating to Web International.
  • Diluted net loss attributable to common stockholders per share of $0.17, compared to a diluted net loss of $0.03 in the fourth quarter of FY 2016.

To supplement our financial statements presented in accordance with Generally Accepted Accounting Principles (GAAP), we are also presenting adjusted operating income (loss) and adjusted EBITDA. Management believes that these additional metrics provide useful information to our investors as an indicator of performance because they exclude non-cash stock-based compensation expense. Non-GAAP Financial Highlights for the three months ended June 30, 2017 (Fourth Quarter Fiscal Year 2017) are as follows. Historical information for these metrics can be found in Appendix A.

  • Adjusted operating income of $12.8 million, compared to $5.4 million in the fourth quarter of FY 2016.
  • Adjusted EBITDA of $30.7 million, compared to $23.0 million in the fourth quarter of FY 2016.

Financial Highlights for the Year Ended June 30, 2017

  • Revenues of $888.5 million, compared to $872.7 million for the full fiscal year of 2016.
  • Operating income of $13.1 million compared to $13.9 million for the full fiscal year of 2016.
  • Net income attributable to common stockholders of $0.5 million, compared to $9.0 million for the full fiscal year of 2016.
  • Diluted net income attributable to common stockholders per share of $0.01, compared to $0.23 for the full fiscal year of 2016.

Non-GAAP Financial Highlights for the year ended June 30, 2017 are as follows.

  • Adjusted operating income of $35.7 million, compared to $32.5 million for the full fiscal year of 2016.
  • Adjusted EBITDA of $110.0 million, compared to $100.8 million for the full fiscal year of 2016.

Liquidity

As of June 30, 2017, the Company had cash and cash equivalents of $230.9 million, an increase of $16.9 million compared to the $214.0 million reported at June 30, 2016.

Comments from Management

“In fiscal 2017, we delivered increased revenues and improved operating efficiencies across the organization while strategically allocating capital toward products, technology and programs that support the students, teachers and schools we serve,” said Stuart Udell, Chief Executive Officer. “We will continue to work with our partners and school districts to deliver a robust and engaging set of educational options for students, while driving consistent revenue growth and higher levels of free cash flow in our businesses over the long-term,” Udell added.

Capital Expenditures

Capital expenditures for the year ended June 30, 2017 were $48.2 million, a decrease of $14.7 million from the prior year’s full fiscal year, and was comprised of:

  • $2.2 million for property and equipment,
  • $26.9 million for capitalized software development, and
  • $19.1 million for capitalized curriculum.

Revenue and Enrollment Data

Revenue

The Company’s revenues are generally in three categories — Managed Public School Programs (where K12 provides substantially all management, technology and academic support services in addition to curriculum, learning systems and instructional services), Institutional (Non-managed Public School Programs – curriculum, technology and other educational services where K12 does not provide primary administrative oversight, and Institutional Software and Services – educational software and services provided to school districts, public schools and other educational institutions), and Private Pay Schools and Other (private schools for which it charges student tuition and makes direct consumer sales) – The following table sets forth the Company’s revenues for the periods indicated:

           

Three Months Ended June 30,

Change 2017 / 2016 Year Ended June 30, Change 2017 / 2016
2017   2016   $     % 2017   2016   $     %
(In thousands, except percentages)
       
Managed Public School Programs $ 179,337 $ 183,426 $ (4,089 ) -2.2 % $ 733,690 $ 717,059 $ 16,631 2.3 %
 
Institutional
Non-managed Public School Programs 13,402 11,160 2,242 20.1 % 65,362 55,601 9,761 17.6 %
Institutional Software & Services   14,741     16,856   (2,115 ) -12.5 %   53,709     52,990   719   1.4 %
Total Institutional 28,143 28,016 127 0.5 % 119,071 108,591 10,480 9.7 %
Private Pay Schools and Other   8,278     9,877   (1,599 ) -16.2 %   35,758     47,050   (11,292 ) -24.0 %
Total $ 215,758   $ 221,319 $ (5,561 ) -2.5 % $ 888,519   $ 872,700 $ 15,819   1.8 %
 

Enrollment Data

The following table sets forth average enrollment data for the periods indicated. These figures exclude enrollments from classroom pilot programs and consumer programs.

       

Three Months Ended
June 30,

  2017 / 2016  

Year Ended
June 30,

  2017 / 2016
(in thousands except for percentages) 2017   2016 Change   Change % 2017   2016 Change   Change %
 
 
Managed Public School Programs (1,2) 97.4 98.4 (1.0) -1.0% 103.7 102.9 0.8 0.8%
Non-managed Public School Programs (1) 28.9 25.7 3.2 12.5% 28.9 27.0 1.9 7.0%
 
(1) If a school changes from a Managed Public School Programs to a Non-managed Public School Program, the corresponding enrollment classification would change in the period in which the contract arrangement changed.
(2) Managed Public School Programs may include enrollments for which K12 receives no public funding or revenue.
 

Revenue per Enrollment Data

The following table sets forth revenue per average enrollment data for students in Public School Programs for the periods indicated.

             
Three Months Ended Change Year Ended Change
June 30, 2017/ 2016 June 30, 2017 / 2016
2017   2016   $   % 2017 2016 $ %
Managed Public School Programs $ 1,841 $ 1,864 $ (23 ) -1.2 % $ 7,075 $ 6,969 $ 106 1.5 %
Non-managed Public School Programs 464 434 30 6.9 % 2,262 2,059 203 9.9 %
 

Fiscal Year 2018 Outlook

As was done in fiscal year 2017, the Company will provide an outlook for fiscal 2018 results as part of the first quarter results report for fiscal year 2018. This first quarter results is planned to be published at or near the end of October 2017. No separate guidance communication, or enrollment counts, for fiscal 2018 will be provided before that time.

Special Note on Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We have tried, whenever possible, to identify these forward-looking statements using words such as “anticipates,” “believes,” “estimates,” “continues,” “likely,” “may,” “opportunity,” “potential,” “projects,” “will,” “expects,” “plans,” “intends” and similar expressions to identify forward looking statements, whether in the negative or the affirmative. These statements reflect our current beliefs and are based upon information currently available to us. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties, factors and contingencies include, but are not limited to: reduction of per pupil funding amounts at the schools we serve; inability to achieve sufficient levels of new enrollments to sustain or to grow our business model; failure of the schools we serve to comply with regulations resulting in a loss of funding, an obligation to repay funds previously received or contractual remedies; declines or variations in academic performance outcomes as curriculum and testing standards evolve; harm to our reputation resulting from poor performance or misconduct by operators or us in any school in our industry and in any school in which we operate; legal and regulatory challenges from opponents of virtual public education, public charter schools or for-profit education companies; discrepancies in interpretation of legislation by regulatory agencies that may lead to payment or funding disputes; termination of our contracts with schools due to a loss of authorizing charter; failure to enter into new school contracts or renew existing contracts, in part or in their entirety; unsuccessful integration of mergers, acquisitions and joint ventures; failure to further develop, maintain and enhance our technology, products, services and brands; inadequate recruiting, training and retention of effective teachers and employees; infringement of our intellectual property; entry of new competitors with superior competitive technologies and lower prices; disruptions to our Internet-based learning and delivery systems resulting from cyber-attacks; and other risks and uncertainties associated with our business described in the Company’s filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of June 30, 2017, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

Conference Call

The Company will discuss its fourth quarter, and full fiscal year 2017 financial results during a conference call scheduled for Tuesday, August 8, 2017 at 5:00 p.m. eastern time (ET).

The conference call will be webcast and available at http://public.viavid.com/index.php?id=125165. Please access the web site at least 15 minutes prior to the start of the call.

To participate in the live call, investors and analysts should dial (877) 407-4019 (domestic) or (201) 689-8337 (international) at 4:45 p.m. (ET). No passcode is required.

A replay of the call will be available starting on August 8, 2017 at 8:00 p.m. ET through September 8, 2017 at 8:00 p.m. ET, at (877) 660-6853 (domestic) or (201) 612-7415 (international) using conference ID 13664754. A webcast replay of the call will be available at http://public.viavid.com/index.php?id=125165 for 30 days.

Financial Statements

The financial statements set forth below are not the complete set of K12 Inc.’s financial statements for the three months and full fiscal year ended June 30, 2017, and are presented below without footnotes. Readers are encouraged to obtain and carefully review K12 Inc.’s Annual Report on Form 10-K for the year ended June 30, 2017, including all financial statements contained therein and the footnotes thereto, filed with the SEC. The Form 10-K may be retrieved from the SEC’s website at www.sec.gov or from K12 Inc.’s website at www.k12.com.

   
K12 INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
June 30,
2017 2016

(In thousands except share and per share data)

ASSETS
Current assets
Cash and cash equivalents $ 230,864 $ 213,989
Accounts receivable, net of allowance of $14,791 and $10,813 at June 30, 2017 and 2016, respectively 192,205 169,554
Inventories, net 30,503 30,631
Prepaid expenses 8,006 9,634
Other current assets   12,004     22,047  
Total current assets 473,582 445,855
Property and equipment, net 26,297 28,447
Capitalized software, net 62,695 70,055
Capitalized curriculum development costs, net 59,213 63,367
Intangible assets, net 20,226 23,102
Goodwill 87,214 87,285
Deposits and other assets   6,057     15,944  
Total assets $ 735,284   $ 734,055  
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of capital lease obligations $ 11,880 $ 13,210
Accounts payable 30,052 25,919
Accrued liabilities 21,622 26,877
Accrued compensation and benefits 29,367 31,042
Deferred revenue   24,830     25,964  
Total current liabilities 117,751 123,012
Capital lease obligations, net of current portion 10,025 9,922
Deferred rent, net of current portion 4,157 6,661
Deferred tax liability 16,726 18,458
Other long-term liabilities   11,579     9,780  
Total liabilities   160,238     167,833  
Commitments and contingencies
Redeemable noncontrolling interest   700     7,502  
Stockholders’ equity
Common stock, par value $0.0001; 100,000,000 shares authorized; 44,325,772 and 43,184,068 shares issued and 40,823,174 and 39,681,470 shares outstanding at June 30, 2017 and 2016, respectively 4 4
Additional paid-in capital 690,488 675,436
Accumulated other comprehensive loss (170 ) (293 )
Accumulated deficit (40,976 ) (41,427 )
Treasury stock of 3,502,598 shares at cost at June 30, 2017 and 2016   (75,000 )   (75,000 )
Total stockholders’ equity   574,346     558,720  
Total liabilities, redeemable noncontrolling interest and stockholders’ equity $ 735,284   $ 734,055  
               
K12 INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended June 30, Year Ended June 30,
2017 2016 2017 2016
(In thousands except share and per share data)
Revenues $ 215,758 $ 221,319 $ 888,519 $ 872,700
Cost and expenses
Instructional costs and services 139,244 143,136 557,316 546,510
Selling, administrative, and other operating expenses 68,791 76,606 305,617 302,205
Product development expenses   3,011     1,067     12,457     10,071  
Total costs and expenses   211,046     220,809     875,390     858,786  
Income from operations 4,712 510 13,129 13,914
Impairment of investment in Web International Education Group, Ltd. (10,000 ) (10,000 )
Interest income (expense), net   561     (21 )   1,808     (617 )
Income before income taxes and noncontrolling interest (4,727 ) 489 4,937 13,297
Income tax expense   (1,876 )   (822 )   (5,396 )   (4,746 )
Net income (loss) (6,603 ) (333 ) (459 ) 8,551
Add net loss attributable to noncontrolling interest   120     (649 )   910     484  
Net income attributable to common stockholders $ (6,483 ) $ (982 ) $ 451   $ 9,035  
Net income attributable to common stockholders per share:
Basic $ (0.17 ) $ (0.03 ) $ 0.01   $ 0.24  
Diluted $ (0.17 ) $ (0.03 ) $ 0.01   $ 0.23  
Weighted average shares used in computing per share amounts:
Basic   38,757,312     37,768,812     38,298,581     37,613,782  
Diluted   38,757,312     37,768,812     39,500,934     38,850,388  
 
       
K12 INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 

Year Ended June 30,

2017 2016
(In thousands)
Cash flows from operating activities
Net income (loss) $ (459 ) $ 8,551
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense 74,280 68,225
Stock-based compensation expense 22,598 18,616
Excess tax benefit from stock-based compensation (291 ) (6 )
Deferred income taxes (7,065 ) (3,818 )
Provision for doubtful accounts 4,512 4,610
Provision for excess and obsolete inventory 475 691
Provision for student computer shrinkage and obsolescence 246 (459 )
Impairment loss on other assets 586 200
Expensed computer peripherals 3,525 2,625
Impairment of investment in Web International Education Group, Ltd. 10,000
Other (255 )
Changes in assets and liabilities:
Accounts receivable (27,745 ) 14,463
Inventories (348 ) (1,751 )
Prepaid expenses 1,628 1,860
Other current assets 43 2,830
Deposits and other assets 10,020 (8,910 )
Accounts payable 5,317 (3,900 )
Accrued liabilities (4,963 ) 15,497
Accrued compensation and benefits (1,674 ) 4,255
Deferred revenue (1,135 ) 636
Deferred rent and other liabilities   (567 )   (2,437 )
Net cash provided by operating activities   88,728     121,778  
Cash flows from investing activities
Purchase of property and equipment (2,174 ) (5,008 )
Capitalized software development costs (26,918 ) (36,265 )
Capitalized curriculum development costs (19,132 ) (21,627 )
Purchase of noncontrolling interest (9,134 )
Sale of trade name 89
Acquisition of LTS Education Systems, net of cash acquired   71     (19,953 )
Net cash used in investing activities   (57,198 )   (82,853 )
Cash flows from financing activities
Repayments on capital lease obligations (15,697 ) (17,402 )
Proceeds from exercise of stock options 6,953 14
Excess tax benefit from stock-based compensation 291 6
Repurchase of restricted stock for income tax withholding   (6,191 )   (3,394 )
Net cash used in financing activities   (14,644 )   (20,776 )
Effect of foreign exchange rate changes on cash and cash equivalents   (11 )   (12 )
Net change in cash and cash equivalents 16,875 18,137
Cash and cash equivalents, beginning of period   213,989     195,852  
Cash and cash equivalents, end of period $ 230,864   $ 213,989  
 

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with Generally Accepted Accounting Principles (GAAP), we have presented adjusted operating income (loss) and adjusted EBITDA. These measures are not measurements recognized under GAAP.

  • Adjusted operating income (loss) is defined as income (loss) from operations as adjusted for stock-based compensation.
  • Adjusted EBITDA is defined as net income (loss) attributable to common stockholders as adjusted for interest income (expense), net; impairment of investment in Web International Education Group, Ltd.; income tax benefit (expense); noncontrolling interest; stock-based compensation; and depreciation and amortization. Interest expense primarily consists of interest expense for capital leases and on customer receivables.
  • Adjusted EBITDA and adjusted operating income (loss) exclude stock-based compensation, which consists of expenses for stock options, restricted stock, restricted stock units, and performance stock units.

This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. Management believes that the presentation of these non-GAAP measures provides useful information to investors regarding our results of operations because it is an indicator of performance with the removal of stock-based compensation which assists both investors and management in analyzing and benchmarking the performance and value of our business.

We believe adjusted EBITDA is useful to an investor in evaluating our operating performance because it is both widely used to measure a company’s operating performance without regard to items such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets, and to present a meaningful measure of corporate performance exclusive of our capital structure and the method by which assets were acquired.

Our management uses adjusted EBITDA and adjusted operating income (loss):

  • as an additional measurement of operating performance because it assists us in comparing our performance on a consistent basis;
  • in presentations to the members of our Board of Directors to enable our Board to have the same measurement basis of operating performance as is used by management to compare our current operating results with corresponding prior periods; and
  • for consistency with lending covenants on our line of credit.

Other companies may define these non-GAAP measures differently and, as a result, our use of these non-GAAP measures may not be directly comparable to adjusted EBITDA, and adjusted operating income (loss) used by other companies. Although we use these non-GAAP measures as financial measures to assess the performance of our business, the use of non-GAAP measures is limited as they include and/or do not include certain items not included and/or included in the most directly comparable GAAP measure.

Adjusted EBITDA and adjusted operating income (loss) should be considered in addition to, and not as a substitute for, income or loss from operations, net income or loss, and earnings or loss per share prepared in accordance with GAAP as a measure of performance. Adjusted EBITDA is not intended to be a measure of liquidity. You are cautioned not to place undue reliance on these non-GAAP measures.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

           
Three Months Ended June 30, Year Ended June 30,
2017     2016 2017 2016
(In thousands)
Net income (loss) attributable to common stockholders $ (6,483 ) $ (982 ) $ 451 $ 9,035
Interest (income) expense, net (561 ) 21 (1,808 ) 617
Impairment of investment in Web International Education Group, Ltd. 10,000 10,000
Income tax (benefit) expense 1,876 822 5,396 4,746
Noncontrolling interest (120 ) 649 (910 ) (484 )
Stock-based compensation expense   8,041     4,858     22,598     18,616  
Adjusted operating income (loss)   12,753     5,368     35,727     32,530  
Depreciation and amortization   17,955     17,603     74,280     68,225  
Adjusted EBITDA $ 30,708   $ 22,971   $ 110,007   $ 100,755  
 

Appendix A

The following table is provided for reference only and is related to the new non-GAAP metrics provided in this release. The table sets forth adjusted EBITDA and adjusted operating income (loss) for the three months ended September 30, 2015; December 31, 2015; March 31, 2016; and June 30, 2016.

   
Three Months Ended
(in thousands) September 30, 2015     December 31, 2015     March 31, 2016     June 30, 2016
 
Net income (loss) attributable to common stockholders – K12 Inc. $ (12,793 ) $ 8,538 $ 14,273 $ (982 )
Interest (income) expense, net 305 190 101 21
Income tax (benefit) expense (8,097 ) 6,653 5,368 822
Noncontrolling interest 129 (654 ) (608 ) 649
Stock-based compensation expense   4,587     4,954     4,218     4,858  
Adjusted operating income (loss)   (15,869 )   19,681     23,352     5,368  
Depreciation and amortization   16,565     16,470     17,586     17,603  
Adjusted EBITDA $ 696   $ 36,151   $ 40,938   $ 22,971  
 

About K12 Inc.

K12 Inc. (NYSE: LRN) is driving innovation and advancing the quality of education by delivering state-of-the-art, digital learning platforms and technology to students and school districts across the globe. K12’s award-winning curriculum serves over 2,000 schools and school districts and has delivered more than four million courses over the past decade. K12 is a company consisting of thousands of online school educators providing instruction, academic services, and learning solutions to public schools and districts, traditional classrooms, blended school programs, and directly to families. The K12 program is offered in more than seventy K12 partner public schools across the country, and through private schools serving students in all 50 states and more than 100 countries. More information can be found at K12.com.

Espial Reports Second Quarter 2017 Results

OTTAWA, Ontario–(BUSINESS WIRE)–Transforming the viewing experience worldwide, Espial® Group Inc. („Espial” or the „Company”), (TSX:ESP), today announced its second quarter financial results for the three month period ended June 30, 2017.

Highlights

  • Second quarter revenue of $7.8 million, an increase of 72% over the same period in 2016.
  • Second quarter adjusted EBITDA loss was $2.8 million which included $1.3 million of one-time costs. Excluding these costs, adjusted EBITDA loss was $1.5 million.
  • Aamir Hussain, Executive Vice President and CTO of CenturyLink – the 3rd largest Telecom Operator in the US – joined the Espial Board of Directors along with Brian McLaughlin who is a partner at Hydra Capital Partners Inc., a Toronto based investment firm.
  • Announced Elevate IPTV and signed a SaaS agreement for this cloud-based service with a North American cable operator, previously announced to be in trials.
  • Signed new services agreements with both Tele Columbus and NOS for continued enhancements on their next generation Pay TV services.
  • Wide Open West, a US based cable operator, launched Netflix across their subscriber set-tops powered by Espial Elevate cloud service.
  • Tele2, a European mobile and IPTV operator, deployed an updated premium video user experience to its IPTV subscribers in the Netherlands, powered by the Espial Media Service Platform back-office and Espial set-top client solutions.

“In Q2, revenues increased 72% over the same quarter last year”, said Jaison Dolvane, CEO, Espial. “We saw good momentum with current customers like WOW and Tele2 who enhanced their services with features like Netflix and premium user experiences. We also expect to see our other customers, including NOS and Tele Columbus continue to deliver new capabilities and improvements to drive further subscriber expansion. In Q2, we signed a SaaS agreement for our cloud based Elevate IPTV platform, and continued to invest in our cloud and device products. As we look to the second half of the year, we anticipate continued subscriber growth, while we focus on achieving new wins and growing our SaaS revenues. Our Q2 achievements and product investments are important milestones to strengthen our pipeline and position us well in this quickly evolving market.”

Financial Summary

For the three-month period ended June 30, 2017, revenue was $7.8 million compared with revenue of $4.5 million for the three months ended June 30, 2016. Adjusted EBITDA loss for the second quarter of fiscal 2017 was $2.8 million which included $1.3 million of one-time costs related to proxy matters and costs for headcount reduction. Excluding these items, adjusted EBITDA loss was $1.5 million compared to adjusted EBITDA loss of $2.1 million for the second quarter of fiscal 2016. Net loss for the quarter was $3.8 million, compared with a net loss of $2.9 million for the second quarter of fiscal 2016.

Q2 Financial Results

  • Second quarter revenues were $7,809,765 compared with revenues of $4,548,770 in the same period a year ago. Second quarter software license and royalty revenues were $3,724,373 compared to $2,499,924 in the second quarter of fiscal 2016. Professional services for the second quarters of 2017 and 2016 were $1,915,529 and $776,708 respectively. Maintenance and support revenues for the second quarter were $2,169,863 compared to $1,272,138 last year.
  • North American revenues were $4,741,854 in the second quarter of 2017 compared to $687,216 in 2016. Asia revenues were $823,868 in the second quarter of 2017 compared to $854,997 in 2016. European revenues were $2,244,043 in the second quarter of 2017 compared to $3,006,557 in 2016.
  • Gross margin for the second quarter of fiscal 2017 was 73%; unchanged from the second quarter of fiscal 2016.
  • Operating expenses in the second quarter of fiscal 2017 were $9,380,973 compared to $6,039,219 in the second quarter of fiscal 2016.
  • Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (adjusted EBITDA) for the second quarter of fiscal 2017 was a loss of $2,830,355, including $1.3 million of one time costs. Excluding these items, adjusted EBITDA loss was $1.5 million compared to a loss of $2,092,712 in fiscal 2016.
  • Net loss, which includes non-cash items like depreciation, amortization of intangibles and stock compensation, in the second quarter was $3,806,565 compared to a loss of $2,945,976 last year.

Cash and cash equivalents on June 30, 2017, was $41,786,884

A complete set of financial statements and management’s discussion and analysis for the period ended June 30, 2017 will be available at http://www.sedar.com.

Conference Call

The Company will be hosting a conference call to discuss the Q2 2017 financial results on August 8, 2017 at 5:00PM EDT and the phone number to join the results discussion is:

  • Toll Free line (Canada/US) 866-521-4909
  • Toll line (International/Local) 647-427-2311

The playback for the call will be available two hours after the call’s completion and will be available until 11:59pm ET on September 7, 2017, at the following numbers and passcode:

Toll-free line: +1-800-585-8367 or +1-416-621-4642, Passcode: 50678231

About Espial (www.espial.com)

With Espial, video service providers create responsive and engaging subscriber viewing experiences incorporating powerful content discovery and intuitive navigation. Service providers achieve ‘Web-speed’ innovation with Espial’s flexible, open software leveraging RDK and HTML5 technologies. This provides competitive advantage through an immersive and personalized user experience, seamlessly blending advanced TV services with OTT content. With customers spanning six continents, Espial is headquartered in Ottawa, Canada, with R&D centers in Seattle, Montreal, Silicon Valley, Cambridge and Lisbon, and with sales offices in North America, Europe and Asia. For more information, visit www.espial.com.

Forward Looking Statement

This press release contains information that is forward looking information with respect to Espial within the meaning of Section 138.4(9) of the Ontario Securities Act (forward looking statements) and other applicable securities laws. In some cases, forward-looking information can be identified by the use of terms such as „may”, „will”, „should”, „expect”, „plan”, „anticipate”, „believe”, „intend”, „estimate”, „predict”, „potential”, „continue” or the negative of these terms or other similar expressions concerning matters that are not historical facts. In particular, statements or assumptions about, economic conditions, ongoing or future benefits of existing and new customer, and partner relationships or new board nominees, our position or ability to capitalize on the move to more open systems by service providers, existing or future opportunities for the company and products (including our ability to successfully execute on market opportunities and secure new customer wins) and any other statements regarding Espial’s objectives (and strategies to achieve such objectives), future expectations, beliefs, goals or prospects are or involve forward-looking information.

Forward-looking information is based on certain factors and assumptions. While the company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Forward-looking information, by its nature necessarily involves known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those in the forward-looking statements or could cause our current objectives and strategies to change, including but not limited to changing conditions and other risks associated with the on-demand TV software industry and the market segments in which Espial operates, competition, Espial’s ability to continue to supply existing customers and partners with its products and services and avoid being displaced by competitive offerings, effectively grow its integration and support capabilities, execute on market opportunities, develop its distribution channels and generate increased demand for its products, economic conditions, technological change, unanticipated changes in our costs, regulatory changes, litigation, the emergence of new opportunities, many of which are beyond our control and current expectation or knowledge.

Additional risks and uncertainties affecting Espial can be found in Management’s Discussion and Analysis of Results of Operations and Financial Condition and its Annual Information Form for the fiscal years ended December 31, 2016 on SEDAR at www.sedar.com. If any of these risks or uncertainties were to materialize, or if the factors and assumptions underlying the forward-looking information were to prove incorrect, actual results could vary materially from those that are expressed or implied by the forward-looking information contained herein and our current objectives or strategies may change. Espial assumes no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

Non-IFRS Financial Measures

We use Adjusted net income (loss) which removes the impact of our amortization of intangible assets and stock based compensation expense, to measure our performance as these measures align our results and improve comparability against our peers. We use Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working capital requirements.

Adjusted net income (loss) and Adjusted EBITDA are not recognized, defined or standardized measures under IFRS. Our definition of Adjusted net income (loss) and Adjusted EBITDA will likely differ from that used by other companies and therefore comparability may be limited. Adjusted net income (loss) and Adjusted EBITDA should not be considered a substitute for or in isolation from measures prepared in accordance with IFRS. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-IFRS measures and view them in conjunction with the most comparable IFRS financial measures. We have reconciled Adjusted net income (loss) and Adjusted EBITDA to the most comparable IFRS financial measure as follows:

 

Three months ended
June 30, 2017

 

Three months ended
June 30, 2016

 

Six months ended
June 30, 2017

 

Six months ended
June 30, 2016

Net loss $ (3,806,565) $ (2,945,976) $ (5,606,512)   $ (4,913,508)
Add
Share-based compensation 446,510 385,463 878,996 774,919
Amortization of intangibles   301,829   174,683   484,708 349,366
Adjusted net loss (3,058,226) (2,385,830) (4,242,808) (3,789,223)
Add (less)
Depreciation 103,406 80,162 203,236 148,613
Net interest (income) expense (63,980) (85,216) (126,523) (171,948)
Other income/expense 66,419 212,132 149,414 435,682
Income tax   122,026   86,040   199,143 117,663
Adjusted EBITDA $ (2,830,355) $ (2,092,712) $ (3,817,538) $ (3,259,213)

Consolidated Statements of Income and
Comprehensive Income
(In Canadian dollars)

  Three Months Ended   Six Months Ended
June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016
Revenue
Software $ 3,724,373 $ 2,499,924 $ 8,749,724 $ 4,940,663
Professional services 1,915,529 776,708 3,501,463 2,448,733
Support and maintenance 2,169,863 1,272,138 4,222,588 2,483,356
Total revenue 7,809,765 4,548,770 16,473,775 9,872,752
Cost of revenue 2,110,892 1,242,571 4,346,912 3,171,554
Gross margin 5,698,873 3,306,199 12,126,863 6,701,198
Expenses
Sales and marketing 1,904,307 1,417,853 3,559,465 2,682,296
General and administrative 1,703,876 1,005,962 2,710,577 1,870,710
Research and development 5,470,961 3,440,721 10,756,591 6,330,937
Amortization of intangible assets 301,829 174,683 484,708 349,366
  9,380,973 6,039,219 17,511,341 11,233,309
Loss before other income (expense) (3,682,100) (2,733,020) (5,384,478) (4,532,111)
Other expense (66,419) (212,132) (149,414) (435,682)
Interest income 63,980 85,216 126,523 171,948
Loss before taxes (3,684,539) (2,859,936) (5,407,369) (4,795,845)
Income taxes (122,026) (86,040) (199,143) (117,663)
Net loss and comprehensive loss   $ (3,806,565)   $ (2,945,976)   $ (5,606,512)   $ (4,913,508)
 

Loss per common share – basic

$  (0.10)

    $  (0.08)

$ (0.15)

$ (0.13)

Weighted average number of common shares outstanding – basic

36,506,665

   37,362,471

  36,525,088

37,358,859

Consolidated Balance Sheets
(In Canadian Dollars)

    June 30, 2017   December 31, 2016
 
CURRENT ASSETS
Cash and cash equivalents $ 41,786,884 $ 43,047,878
Accounts receivable 7,182,283 10,475,563
Investment tax credits receivable 456,400 321,018
Prepaid expenses and other assets   923,378   653,055
50,348,945 54,497,514
 
Equipment 1,455,850 1,420,957
Intangible assets 1,333,359 1,818,067
Goodwill   3,632,604   3,632,604
  $ 56,770,758 $ 61,369,142
 
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 4,813,792 $ 4,542,527
Provisions 187,119 334,591
Deferred revenue   2,608,318   2,054,323
    7,609,229   6,931,441
 
Total Liabilities 5,204,810 6,931,441
 
SHAREHOLDERS’ EQUITY
Share capital 124,820,391 125,362,413
Share based payments reserve 16,474,223 15,601,861
Deficit   (92,133,085)   (86,526,573)
    49,161,529   54,437,701
  $ 56,770,758 $ 61,369,142

Statements of Cash Flows
(In Canadian Dollars)

  Six Months Ended
  June 30, 2017   June 2016
CASH (USED IN) PROVIDED BY
OPERATING
Net loss $ (5,606,512) $ (4,913,508)
Items not affecting cash
Depreciation of property and equipment 203,236 148,613
Amortization of intangible assets 484,708 349,366
Share-based compensation expense 878,996 774,919
Provisions   (147,472)  
(4,187,044) (3,640,610)
Changes in non-cash operating

working capital items

  3,712,835   (189,201)
    (474,209)   (3,829,811)
INVESTING
Purchase of equipment (238,129) (272,617)
Purchase of intangibles     (125,129)
    (238,129)   (397,746)
FINANCING
Options exercised 8,214 15,206
Share repurchase program   (556,870)  
    (548,656)   15,206
Net cash and cash equivalents outflow (1,260,994) (4,212,351)
Cash and cash equivalents, beginning of period   43,047,878   49,947,096
Cash and cash equivalents, end of period $ 41,786,884 $ 45,734,745
Supplementary information:
Interest received $ 126,523 $ 171,948
Taxes paid $ (199,143) $ (117,663)

Chimera Announces Revised Record Date for Third Quarter Common Stock Cash Dividend – Payment Amount, Payable Date and Ex-Dividend Date Unchanged

NEW YORK–(BUSINESS WIRE)–Chimera Investment Corporation, Inc. (NYSE:CIM) today announced that it revised the previously announced record date for the third quarter dividend of $0.50 per common share from September 29, 2017 to September 28, 2017. The dividend remains payable on October 27, 2017 and the ex-dividend date remains September 27, 2017.

Other Information

Chimera Investment Corporation is a publicly traded real estate investment trust, or REIT, that is primarily engaged in real estate finance. We were incorporated in Maryland on June 01, 2007 and commenced operations on November 21, 2007. We invest, either directly or indirectly through our subsidiaries, in RMBS, residential mortgage loans, Agency CMBS, commercial mortgage loans, real estate-related securities and various other asset classes. We have elected and believe that we are organized and have operated in a manner that enables us to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Code.

Please visit www.chimerareit.com and click on Investor Relations for additional information about us.

Disclaimer

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among other things, those described in our Annual Report on Form 10-K for the year ended December 31, 2016, and any subsequent Quarterly Reports on Form 10-Q, under the caption “Risk Factors.” Factors that could cause actual results to differ include, but are not limited to: the state of credit markets and general economic conditions; changes in interest rates and the market value of our assets; the rates of default or decreased recovery on the mortgages underlying our target assets; the occurrence, extent and timing of credit losses within our portfolio; the credit risk in our underlying assets; declines in home prices; our ability to establish, adjust and maintain appropriate hedges for the risks in our portfolio; the availability and cost of our target assets; our ability to borrow to finance our assets and the associated costs; changes in the competitive landscape within our industry; our ability to manage various operational risks and costs associated with our business; interruptions in or impairments to our communications and information technology systems; our ability to acquire residential mortgage loans and successfully securitize the residential mortgage loans we acquire; our ability to oversee our third party sub-servicers; the impact of any deficiencies in the servicing or foreclosure practices of third parties and related delays in the foreclosure process; our exposure to legal and regulatory claims; legislative and regulatory actions affecting our business; the impact of new or modified government mortgage refinance or principal reduction programs; our ability to maintain our REIT qualification; and limitations imposed on our business due to our REIT status and our exempt status under the Investment Company Act of 1940.

Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Chimera does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in Chimera’s most recent filings with the Securities and Exchange Commission (SEC). All subsequent written and oral forward-looking statements concerning Chimera or matters attributable to Chimera or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.

Readers are advised that the financial information in this press release is based on company data available at the time of this presentation and, in certain circumstances, may not have been audited by the company’s independent auditors.

Handy & Harman Ltd. Reports Second Quarter Financial Results and Outlook for 2017

NEW YORK–(BUSINESS WIRE)–Handy & Harman Ltd. (NASDAQ:HNH), a diversified global industrial company, today announced operating results for the second quarter and six months ended June 30, 2017. For a full discussion of the results, please see the Company’s Form 10-Q as filed with the U.S. Securities and Exchange Commission, which can be found at www.handyharman.com.

HNH reported that net sales for the 2017 second quarter increased to $256.1 million from $200.9 million for the same period in 2016. Income before tax and equity investment was $21.2 million in the second quarter of 2017, compared with $2.6 million in the 2016 period. Net income for the 2017 second quarter rose to $12.5 million, or $1.02 per basic and diluted common share, compared with a net loss of $0.7 million, or $0.06 per basic and diluted common share, for the same period in 2016.

For the six months ended June 30, 2017, net sales grew to $490.8 million, from $361.7 million in 2016. Income before tax and equity investment for 2017 was $29.4 million, compared with $11.6 million in 2016. Net income for the first half of 2017 was $19.4 million, or $1.58 per basic and diluted common share, compared with a net loss of $0.3 million, or $0.02 per basic and diluted common share, in 2016.

Results for the quarter and six months ended June 30, 2016 include certain significant acquisition and integration-related charges associated with our recent acquisitions. In particular, the Company approved the closure of JPS Composite Materials Corporation’s Slater, South Carolina operating facility during the second quarter of 2016 and recorded non-cash asset impairment charges totaling $7.9 million in connection with the planned closure. The Company also recorded acquisition costs totaling $2.7 million and a non-cash charge of $1.0 million due to the amortization of the fair value adjustment to acquisition-date inventories during 2016 associated with the SL Industries, Inc. acquisition.

HNH generated Adjusted EBITDA of $37.6 million for the second quarter of 2017, compared with $25.4 million for the same period in 2016, an increase of $12.2 million, or 48.1%. For the six-month period, the Company generated a 42.7% increase in Adjusted EBITDA to $63.4 million from $44.4 million for the same period in 2016. See „Note Regarding Use of Non-GAAP Financial Measurements” below for the definition of Adjusted EBITDA.

„Operating results for the second quarter reflected contributions from acquired operations, as well as improvements in our Building Materials segment,” said Bill Fejes, President and CEO of Handy & Harman Group Ltd. „Results for the quarter were consistent with our prior guidance. Our guidance for the remainder of the year has been adjusted downward to reflect a combination of weaker than anticipated demand, an unfavorable shift in product mix, and expected higher material costs in the second half of 2017. However, we believe that ongoing productivity investments and continuous improvement through the Steel Business System will help strengthen our performance over the longer term.”

Based on current information, the Company’s outlook for the 2017 third quarter is net sales between $218 million and $266 million and Adjusted EBITDA between $26 million and $31 million. The Company’s outlook for the full 2017 year is net sales between $918 million and $1.013 billion and Adjusted EBITDA between $113 million and $124 million.

On June 26, 2017, HNH and Steel Partners Holdings L.P. (NYSE:SPLP), a diversified global holding company, announced they have entered into a definitive merger agreement, pursuant to which SPLP will make an offer to exchange, for each outstanding share of HNH common stock not already owned by SPLP or its affiliates, 1.484 6.0% Series A preferred units of SPLP. SPLP beneficially owns approximately 70.0% of HNH’s outstanding shares. Consummation of the offer is subject to customary conditions, including the tender of a number of shares of HNH’s common stock that constitutes at least a majority of HNH’s outstanding shares not owned by SPLP or its affiliates. If the transaction is completed, HNH will no longer be publicly traded.

     

Financial Summary

 
Three Months Ended Six Months Ended
(in thousands, except per share) June 30, June 30,
2017   2016 2017   2016
Net sales $ 256,145 $ 200,880 $ 490,786 $ 361,677
Gross profit 74,628 51,962 143,209 95,679
Gross profit margin 29.1 % 25.9 % 29.2 % 26.5 %
Operating income 24,181 4,498 35,923 14,780
Income before tax and equity investment 21,239 2,638 29,391 11,582
Tax provision 8,248 1,138 11,341 4,998
Loss (gain) from associated company, net of tax 478   2,234   (1,330 ) 6,862  
Net income (loss) $ 12,513   $ (734 ) $ 19,380   $ (278 )
Basic and diluted income (loss) per share of common stock        
Net income (loss) per share $ 1.02   $ (0.06 ) $ 1.58   $ (0.02 )
 

Segment Results

 
Statement of Operations Data Three Months Ended Six Months Ended
(in thousands) June 30, June 30,
2017 2016 2017 2016
Net sales:
Joining Materials $ 50,286 $ 46,323 $ 96,826 $ 88,994
Tubing 16,925 20,053 34,928 40,323
Building Materials 87,446 81,434 155,744 139,736
Performance Materials 24,878 26,200 50,254 50,983
Electrical Products (a) 61,534 11,794 122,921 11,794
Kasco 15,076   15,076   30,113   29,847  
Total net sales $ 256,145   $ 200,880   $ 490,786   $ 361,677  
Segment operating income (loss):
Joining Materials $ 6,121 $ 6,127 $ 11,541 $ 10,542
Tubing 2,641 3,558 5,326 7,769
Building Materials 14,453 11,604 23,512 18,957
Performance Materials 1,412 (7,258 ) 2,985 (6,965 )
Electrical Products (a) 6,412 (3,263 ) 10,101 (3,263 )
Kasco 557   565   1,243   1,545  
Total segment operating income 31,596   11,333   54,708   28,585  
Unallocated corporate expenses and non-operating units (4,931 ) (4,876 ) (13,754 ) (9,859 )
Unallocated pension expense (2,652 ) (2,132 ) (5,305 ) (4,283 )
Gain from asset dispositions 168   173   274   337  
Operating income 24,181   4,498   35,923   14,780  
Interest expense (2,910 ) (1,345 ) (5,840 ) (2,415 )
Realized and unrealized gain (loss) on derivatives 286 (416 ) (75 ) (539 )
Other expense (318 ) (99 ) (617 ) (244 )
Income before tax and equity investment $ 21,239   $ 2,638   $ 29,391   $ 11,582  

(a) – The Electrical Products segment is comprised of the operations of SL Industries, Inc. and those of the former Electromagnetic Enterprise division of Hamilton Sundstrand Corporation, which were acquired on June 1, 2016 and September 30, 2016, respectively.

   

Supplemental Non-GAAP Disclosures

 
Adjusted EBITDA Three Months Ended Six Months Ended
(in thousands) June 30, June 30,
2017   2016 2017   2016
Net income (loss) $ 12,513 $ (734 ) $ 19,380 $ (278 )
Add (Deduct):
Loss (gain) from associated company, net of tax 478 2,234 (1,330 ) 6,862
Tax provision 8,248 1,138 11,341 4,998
Interest expense 2,910 1,345 5,840 2,415
Non-cash derivative and hedge (gain) loss on precious metal contracts (286 ) 416 75 539
Non-cash adjustment to precious metal inventory valued at LIFO 126 (95 ) 236 286
Depreciation and amortization 9,772 6,663 20,335 12,350
Non-cash pension expense 2,652 2,132 5,305 4,283
Non-cash asset impairment charges 7,858 7,858
Non-cash stock-based compensation 108 259 340 931
Amortization of fair value adjustments to acquisition-date inventories 984

 

984
Other items, net 1,038   3,156   1,839   3,181  
Adjusted EBITDA $ 37,559   $ 25,356   $ 63,361   $ 44,409  
 

Note Regarding Use of Non-GAAP Financial Measurements

The financial data contained in this press release includes certain non-GAAP financial measurements as defined by the U.S. Securities and Exchange Commission („SEC”), including „Adjusted EBITDA.” The Company is presenting Adjusted EBITDA because it believes that it provides useful information to investors about HNH, its business, and its financial condition. The Company defines Adjusted EBITDA as net income or loss before the effects of gains or losses from investment in associated company, realized and unrealized gains or losses on derivatives, interest expense, taxes, depreciation and amortization, LIFO liquidation gains or losses, and non-cash pension expense, and excludes certain non-recurring and non-cash items. The Company believes Adjusted EBITDA is useful to investors because it is one of the measures used by the Company’s Board of Directors and management to evaluate its business, including in internal management reporting, budgeting, and forecasting processes, in comparing operating results across the business, as an internal profitability measure, as a component in evaluating the ability and the desirability of making capital expenditures and significant acquisitions, and as an element in determining executive compensation.

However, Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the U.S. („U.S. GAAP”), and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for net income or cash flows from operating, investing, or financing activities. Because Adjusted EBITDA is calculated before recurring cash charges, including realized losses on derivatives, interest expense, and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business. There are a number of material limitations to the use of Adjusted EBITDA as an analytical tool, including the following:

  • Adjusted EBITDA does not reflect gains or losses from the Company’s investment in associated company;
  • Adjusted EBITDA does not reflect the Company’s net realized and unrealized gains and losses on derivatives and any LIFO liquidations of its precious metal inventory;
  • Adjusted EBITDA does not reflect the Company’s interest expense;
  • Adjusted EBITDA does not reflect the Company’s tax provision or the cash requirements to pay its taxes;
  • Although depreciation and amortization are non-cash expenses in the period recorded, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect the cash requirements for such replacement;
  • Adjusted EBITDA does not include non-cash charges for pension expense and stock-based compensation; and
  • Adjusted EBITDA does not include certain other non-recurring and non-cash items.

The Company compensates for these limitations by relying primarily on its U.S. GAAP financial measures and by using Adjusted EBITDA only as supplemental information. The Company believes that consideration of Adjusted EBITDA, together with a careful review of its U.S. GAAP financial measures, is the most informed method of analyzing HNH.

The Company reconciles Adjusted EBITDA to net income or loss, and that reconciliation is set forth above. Because Adjusted EBITDA is not a measurement determined in accordance with U.S. GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

About Handy & Harman Ltd.

Handy & Harman Ltd. is a diversified manufacturer of engineered niche industrial products with leading market positions in many of the markets it serves. Through its wholly-owned operating subsidiaries, HNH focuses on high margin products and innovative technology and serves customers across a wide range of end markets. HNH’s diverse product offerings are marketed throughout the U.S. and internationally.

HNH’s companies are organized into six businesses: Joining Materials, Tubing, Building Materials, Performance Materials, Electrical Products, and Kasco.

The Company sells its products and services through direct sales forces, distributors, and manufacturer’s representatives. HNH serves a diverse customer base, including the construction, electrical, electronics, transportation, power control, utility, medical, oil and gas exploration, aerospace and defense, and food industries.

The Company’s business strategy is to enhance the growth and profitability of the HNH business units and to build upon their strengths through internal growth, the Steel Business System, and strategic acquisitions. Management expects HNH to continue to focus on high margin products and innovative technology. Management has evaluated and will continue to evaluate, from time to time, potential strategic and opportunistic acquisition opportunities, as well as the potential sale of certain businesses and assets.

The Company is based in New York, N.Y., and its common stock is listed on the NASDAQ Capital Market under the symbol HNH. Website: www.handyharman.com

Forward-Looking Statements

This press release contains certain „forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect HNH’s current expectations and projections about its future results, performance, prospects, and opportunities. HNH has tried to identify these forward-looking statements by using words such as „may,” „should,” „expect,” „hope,” „anticipate,” „believe,” „intend,” „plan,” „estimate,” and similar expressions. These forward-looking statements are based on information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause its actual results, performance, prospects, or opportunities in 2017 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These factors include, without limitation, HNH’s need for additional financing and the terms and conditions of any financing that is consummated, customers’ acceptance of its new and existing products, the risk that the Company will not be able to compete successfully, the possible volatility of the Company’s stock price, and the potential fluctuation in its operating results. Although HNH believes that the expectations reflected in these forward-looking statements are reasonable and achievable, such statements involve significant risks and uncertainties, and no assurance can be given that the actual results will be consistent with these forward-looking statements. Investors should read carefully the factors described in the „Risk Factors” section of the Company’s filings with the SEC, including the Company’s Form 10-K for the year ended December 31, 2016 and the Company’s Form 10-Q for the quarterly period ended June 30, 2017, for information regarding risk factors that could affect the Company’s results. Except as otherwise required by Federal securities laws, HNH undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any other reason.