PCTEL, INC. The following information should be read in conjunction with the unaudited interim condensed consolidated financial statements ofPCTEL, Inc. ("PCTEL ," the "Company," "we," "our," and "us") and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and in conjunction with the consolidated financial statements for the year endedDecember 31, 2021 contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 (the "2021 Form 10-K"). This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In some cases, you can identify these forward-looking statements by words such as "may," "will," "plans," "seeks," "expects," "anticipates," "intends," "believes" and words of similar meaning. Investors in our common stock are cautioned not to place undue reliance on these forward-looking statements. Specifically, these statements include, but are not limited to, statements concerning our future financial performance; growth of our antennas and Industrial IoT business and our test and measurement business; the impact of the acquisition of Smarteq on the Company's ability to offer additional products, expand in the European market and through distribution channels, and generate revenue; the impact of our transition plan for manufacturing inside and outsideChina ; the impact of the COVID-19 pandemic and the ensuing supply chain disruptions; the impact of geopolitical conditions, including the ongoing conflict inUkraine and related sanctions, disruption in petroleum and other markets; inflation, economic weakness, and potential recession; and the anticipated demand for certain products, including those related to public safety, Industrial IoT, 5G (e.g., the Gflex scanning receiver), agriculture and intelligent transportation. 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. Important factors that could cause such differences include, but are not limited to, the impact of adverse and uncertain economic and political conditions in theU.S. and international market, including inflationary pressures, economic downturn, and the potential for a recession; inflation and increases in product and material costs; competition within the wireless product industry; volatility and delays in customer demand caused by the COVID-19 pandemic and/or the war inUkraine , or the economic slowdown; the impact of uncertainty in our supply chain, as well as labor shortages and shipping delays and disruptions; our ability to accurately forecast demand for our products; our ability to successfully integrate Smarteq and any future acquisitions into our existing operations; the impact of uncertainty as a result of doing business inChina andEurope ; the impact of tariffs on certain imports fromChina ; delays in our sales cycles resulting in the cancellation of purchases of our products; macroeconomic conditions, including inflation and increased in product and material costs; and our ability to grow our business and create, protect and implement new technologies and solutions. These and other risks and uncertainties are detailed in our filings with theSecurities and Exchange Commission ("SEC"). These forward-looking statements are made only as of the date hereof. We do not undertake, and expressly disclaim, any obligation to update or revise any forward-looking statements whether because of new information, future events or otherwise, except as may be required by applicable law. Investors should carefully review the information contained in Item 1A Risk Factors.
Business Overview
PCTEL is a leading global provider of wireless technology, including purpose-built Industrial Internet of Things ("IoT") devices, antennas, and test & measurement products. We solve complex wireless challenges to help organizations stay connected, transform, and grow. We have a strong brand presence and expertise in radio frequency ("RF"), digital and mechanical engineering. We have two businesses (antennas/Industrial IoT devices and test & measurement products) that address three market segments:Enterprise Wireless , Intelligent Transportation, and Industrial IoT. Our antennas and Industrial IoT devices include antennas deployed in small cells, enterprise Wi-Fi access points, fleet management and transit systems, and in network equipment and devices for Industrial IoT. Our test & measurement products improve the performance of wireless networks globally. Mobile operators, neutral hosts, and network equipment manufacturers rely on our products to analyze, design, and optimize next generation wireless networks. We seek out product applications that command a premium for product design and performance, and we avoid commodity markets. Our strength is solving complex wireless challenges for our customers through our products and solutions. To this end, we are constantly innovating and improving antenna and wireless testing products and capabilities to capture the opportunities of the rapidly evolving wireless industry. We focus on engineering, research, and development to maintain and expand our competitiveness.
Antennas and Industrial IoT devices
PCTEL designs and manufactures precision antennas and Industrial IoT devices, and we offer in-house wireless product development for our customers, including design, testing, radio integration, and manufacturing capabilities. Market opportunities for this product line are driven by the increased use and complexity of wireless communications. Our antenna portfolio includes Wi-Fi, Bluetooth, Land Mobile Radio ("LMR"), Tetra, Global Navigation Satellite System ("GNSS"), Cellular, Industrial, Scientific, and Medical ("ISM"), Long Range ("LoRa"), and combination antenna solutions. The market applications for our antennas include public safety communications, military communications, utilities & energy, precision agriculture, smart traffic management, Electric Vehicle ("EV") charging stations, embedded vehicles, forestry machinery & off-road vehicles. For smart traffic management, we provide antenna systems for smart roadways and smart rail. Fleet antennas for public safety, including 27 -------------------------------------------------------------------------------- police vehicles, are a key market. We not only manufacture the antennas, but we also provide engineering design services to determine the layout of multi-antenna installations to minimize potential interference between each antenna element. Our customized solutions often result in general purpose products with advance capabilities, such as multi-element antenna systems in a single radome. These systems can include several LTE bands, Wi-Fi bands and GPS navigation elements, all in one housing. An antenna designed for one application can be modified to be used for other applications. Our Industrial IoT device portfolio includes access points, radio modules, sensor communication modules, and wireless communication sensors. The market applications for our Industrial IoT devices include utilities and smart grid, oil and gas, manufacturing, logistics, industrial automation, smart metering, and asset tracking. Our strategy is to provide a "toolbox" of hardware solutions to our existing OEMs and distributors for Industrial IoT systems. We provide all of the field hardware required for wireless Industrial IoT systems - antennas, ruggedized Wi-Fi access points, radio modules, and integrated cellular sensors for Industrial IoT. Our go-to-market strategy for this sector is to sell more RF hardware components to our customers that traditionally purchase antennas fromPCTEL . Test & Measurement ProductsPCTEL provides RF test & measurement products that improve the performance of wireless networks globally, with a focus on LTE, public safety, and 5G technologies. Market opportunities for this product line are driven by the implementation and roll out of new wireless technology standards (i.e., 3G to 4G, 4G to 5G) and new market applications for public safety and government. The market applications for our test & measurement equipment includes cellular testing, public safety and private radio network testing, federal government communications testing, and indoor building network testing. Our portfolio includes scanning receivers, scanning receiver software, public safety solutions, interference location systems, mmwave transmitters, and a cloud-based reporting platform. Our scanning receivers are software defined radios used to 1) confirm adequate RF coverage during deployment, 2) identify interfering signals which decrease capacity, 3) troubleshoot system performance issues as networks expand, and 4) benchmark competing networks because our scanning receivers can scan all technologies across all frequencies during one test. They are necessary for initial network deployment and throughout the entire life cycle of the mobile network. Most of our 4G scanners can be upgraded to 5G via firmware. Our new Gflex scanning receiver includes advanced features to address 5G and broader critical communication and government applications such as signal intelligence.
We provide test & measurement equipment to test in-building communication capability important for first responders and to certify buildings meet certain in-building wireless communication standards. We provide test & measurement equipment to test public safety networks, including P25, Tetra and digital mobile radio ("DMR").
Our cloud-based reporting platform for public safety is a subscription-based
service for test management, storage and analytics that allows stakeholders,
including engineering service companies, building owners and government
jurisdictions, to easily manage the data collection process and access final
reports through an online map-based interface.
Consistent with our mission to solve complex network engineering problems and to
compete effectively in the RF test & measurement market, we maintain expertise
in the following areas: RF engineering, digital signal processing ("DSP")
engineering, wireless network engineering, mechanical engineering,
manufacturing, and product quality and testing. Competitors for our test &
measurement products include OEMs such as Anritsu, Berkley Varitronics, Digital
Receiver Technology, Rohde and Schwarz , and Viavi.
COVID-19 Update
The COVID-19 pandemic and associated counter-acting measures implemented by governments and businesses around the world, as well as subsequent recoveries in global business activity, continue to contribute uncertainty in the global business environment and has led to supply chain disruptions and shortages in global markets for commodities, logistics and labor, and as well as increased inflationary pressures. Currently our expectation is that the impact of cost inflation, including as well as supplier component input availability will continue throughout 2022. We continue to closely monitor the risks posed by COVID-19 and the guidance from relevant authorities. We adjust our health and safety protocols and practices accordingly, as we have throughout the pandemic. We will also continue to proactively respond to the situation and may take further actions that alter our business activity as may be required by governmental authorities or that we determine are in the best interests of our employees and operations.
Third Quarter Overview
Revenues for the three months endedSeptember 30, 2022 were$26.0 million , an increase of 16.0% compared to$22.4 million for the same period in 2021. By product line, revenues increased by$1.8 million (29.8%) to$7.7 million for test & measurement products and increased by$2.0 million (11.8%) to$18.6 million for antennas and Industrial IoT devices. The increase in revenues for antennas and 28 -------------------------------------------------------------------------------- Industrial IoT devices was primarily due to higher revenues with antennas for fleet applications and a full quarter of revenues related to sales of Smarteq products. Gross profits of$11.9 million for the quarter increased by$1.7 million (16.4%) compared to the same period in 2021, primarily due to the revenue increases for both product lines. Operating expense of$10.6 million was$1.0 million higher (10.7%) than in the third quarter 2021. The increase in operating expense is from higher incentive compensation expenses, travel and marketing expenses. The net impact of these changes resulted in income before tax of$1.5 million for the third quarter of 2022 compared to the income before tax of$0.7 million in the third quarter 2021. Revenues for the nine months endedSeptember 30, 2022 were$73.5 million , an increase of 18.9% compared to$61.8 million for the same period in 2021. By product line, revenues increased by$2.2 million (11.6%) to$20.7 million for test & measurement products and increased by$9.3 million (21.2%) to$53.3 million for antennas and Industrial IoT devices. The increase in revenues for test & measurement products was driven by growth in products for public safety applications. The increase in revenues for antennas and Industrial IoT devices was primarily due to revenues for fleet applications and from the inclusion of nine months of revenues related to the acquisition of Smarteq. Gross profits of$32.7 million increased by$4.2 million (14.6%) compared to the same period in the prior year due to the higher revenues in both product lines. Operating expense of$32.6 million was$3.9 million higher (13.7%) than the same period in the prior year. The increase results from additional restructuring expenses of$1.3 million , higher incentive compensation expenses, travel and marketing expenses, as well as inclusion of nine months of Smarteq's operating expenses. The net impact of these changes resulted in an increase in our income before tax of$0.6 million and an increase to net income of$1.0 million for the nine months endedSeptember 30, 2022 compared to the same period in 2021. Our cash and investments decreased by$0.3 million during the third quarter 2022 as we generated free cash flow of$1.0 million and paid our quarterly dividend of$1.0 million . As ofSeptember 30, 2022 , we had cash and investments of$28.0 million and no debt. Smarteq Acquisition OnApril 30, 2021 , we acquired all the outstanding stock ofSmarteq Wireless Aktiebolag, a Swedish company based in Kista,Sweden that designs antennas for specialized Industrial IoT and vehicular applications, pursuant to a Share Sale and Purchase Agreement betweenPCTEL and Allgon Aktiebolag, a Swedish company and holder of the outstanding stock of Smarteq (the "Agreement").PCTEL paid cash consideration ofSEK 56.8 million ($6.8 million ) at the close of the transaction, all of which was provided fromPCTEL's existing cash. We believe the acquisition of Smarteq provides us with a strong local presence, expertise for our antenna product line, and channel partners to accelerate our growth inEurope , as well as a complementary portfolio of products for our Industrial IoT and intelligent transportation customers worldwide. The results for Smarteq are combined with the Company's antenna and Industrial IoT devices product line. 29 -------------------------------------------------------------------------------- Results of Operations Three and Nine Months EndedSeptember 30, 2022 and 2021 (in thousands) Revenues by Product Line Three Months Ended September 30, 2022 2021 $ Change % Change
Antennas & Industrial IoT Devices
11.8 % Test & Measurement Products 7,683$ 5,921 1,762 29.8 % Corporate (348 )$ (196 ) (152 ) not meaningful Total$ 25,988 $ 22,411 $ 3,577 16.0 % Nine Months Ended September 30, 2022 2021 $ Change % Change
Antennas & Industrial IoT Devices
21.2 % Test & Measurement Products 20,698 18,540 2,158 11.6 % Corporate (502 ) (712 ) 210 not meaningful Total$ 73,506 $ 61,799 $ 11,707 18.9 % Revenues increased 16.0% for the three months endedSeptember 30, 2022 compared to the same period in 2021 due to higher revenues for both i) antennas and Industrial IoT devices and ii) the test & measurement product lines. Revenues for the test & measurement product line increased 29.8% for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 due to higher revenues in theU.S. for scanning receivers with 5G technologies. For the three months endedSeptember 30, 2022 , revenues increased for the antenna product line by 11.8% compared to the same period in 2021 due to higher revenues from fleet applications in the agriculture market. Revenues increased 18.9% for the nine months endedSeptember 30, 2022 compared to the same period in 2021 due to higher revenues for both i) antennas and Industrial IoT devices and ii) test & measurement products. For the nine months endedSeptember 30, 2022 , revenues increased for antennas and Industrial IoT devices by 21.2% compared to the same period in 2021 due to higher revenues of antennas for fleet applications for agriculture and inclusion of nine months of revenues from the Smarteq. Revenues for the test & measurement product line increased 11.6% for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 due to higher revenues in theU.S. for scanning receivers with 5G technologies. Gross Profit by Product Line Three Months Ended September 30, 2022 % of Revenues 2021 % of Revenues Antennas & Industrial IoT Devices$ 6,562 35.2 %$ 5,655 33.9 % Test & Measurement Products 5,544 72.2 %$ 4,635 78.3 % Corporate (170 ) not meaningful (36 ) not meaningful Total$ 11,936 45.9 %$ 10,254 45.8 % Nine Months Ended September 30, 2022 % of Revenues 2021 % of Revenues Antennas & Industrial IoT Devices$ 17,435 32.7 %$ 14,578 33.2 % Test & Measurement Products$ 15,466 74.7 %$ 14,057 75.8 % Corporate$ (205 ) not meaningful$ (102 ) not meaningful Total$ 32,696 44.5 %$ 28,533 46.2 % The gross profit percentage for the three months endedSeptember 30, 2022 was approximately the same as in the same period in 2021. The gross profit percentage for the antennas and Industrial IoT devices increased by 1.3% for the three months endedSeptember 30, 2022 compared to the same period in 2021 primarily due to lower freight costs. The gross margin percentage for test & measurement products was lower by 6.1% in the third quarter 2022 compared to the prior year primarily due to product mix but also from higher component costs. 30 -------------------------------------------------------------------------------- The gross profit percentage decreased by 1.7% for the nine months endedSeptember 30, 2022 compared to the same period in 2021 due to a higher mix of antennas and IoT devices and due to lower gross margin percentages for both product lines. The gross profit percentage for antennas and Industrial IoT devices was lower by 0.5% for the nine months endedSeptember 30, 2022 compared to the same period in 2021 due to product mix and higher logistics costs. The gross profit percentage for test & measurement products decreased by 1.1% for the nine months endedSeptember 30, 2022 compared to the same period in 2021 primarily due to product mix.
Consolidated Operating Expenses
Three Months Three Months
Ended Ended
September 30, September 30, % of Revenues
2022 Change 2021 2022 2021Research and development$ 3,178 $ (160 ) $ 3,338 12.2 % 14.9 % Sales and marketing 3,600 253 3,347 13.9 % 14.9 % General and administrative 3,705 888 2,817 14.3 % 12.6 % Amortization of intangible assets 63 (17 ) 80 0.2 % 0.4 % Restructuring expenses 57 58 (1 ) 0.2 % 0.0 % Total$ 10,603 $ 1,022 $ 9,581 40.8 % 42.8 % Nine Months Nine Months Ended Ended September 30, September 30, % of Revenues 2022 Change 2021 2022 2021
Research and development$ 9,784 $ 30 $ 9,754 13.3 % 15.8 % Sales and marketing 10,910 1,413 9,497 14.8 % 15.4 % General and administrative 10,399 1,171 9,228 14.1 % 14.9 % Amortization of intangible assets 201 66 135 0.3 % 0.2 % Restructuring expenses 1,309 1,250 59 1.8 % 0.1 % Total$ 32,603 $ 3,930 $ 28,673 44.3 % 46.4 % Research and development expenses were lower by$0.2 million for the three months endedSeptember 30, 2022 , compared to the same period in 2021 primarily due to the termination of engineering employees inBeijing, China that occurred during the fourth quarter 2021. Research and development expenses were approximately the same for the nine months endedSeptember 30, 2022 , compared to the same period in 2021 as the higher development expenses for new test & measurement products and inclusion of nine months of Smarteq's expense for research and development offset the reduction in expense resulting from the termination of engineering employees inBeijing, China during the fourth quarter 2021.
Sales and marketing expenses include costs associated with the sales and marketing employees, product line management, and trade show expenses.
Sales and marketing expenses increased$0.3 million for the three months endedSeptember 30, 2022 compared to the same period in 2021 due to higher employee related expenses, and higher travel and marketing expenses.
Sales and marketing expenses increased
General and administrative expenses include costs associated with general management, finance, human resources, IT, legal, public company costs, and other operating expenses to the extent not otherwise allocated to business segments.
General and administrative expenses increased by
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General and administrative expenses increased by
Amortization of intangible assets within operating expenses was$0.1 million for the three months endedSeptember 30, 2022 and$0.2 million for the nine months endedSeptember 30, 2022 , which relates to amortization of intangible assets from the Smarteq acquisition. Restructuring expenses relate to expenses for the transition of manufacturing operations from ourTianjin, China facility to contract manufacturers. Restructuring expenses of$0.1 million for three months endedSeptember 30, 2022 and$1.3 million for nine months endedSeptember 30, 2022 , consisted primarily of employee severance and payroll related costs associated with the termination of 78 Tianjin-based employees during the nine months endedSeptember 30, 2022 . Other Income (Expense), Net Three Months EndedSeptember 30 ,
Nine Months Ended
2022 2021 2022 2021
Interest income $ 75 $ 6 $ 125 $ 37
Foreign exchange gains (losses) 114 (10 ) 188 (54 )
Other, net 16 0 17 7
Total $ 205 $ (4 ) $ 330 $ (10 )
Percentage of revenues 0.8 % (0.0 )% 0.4 % (0.0 )%
Other income, net consists of interest income, foreign exchange gains, and
interest expense. Interest income from investment securities increased during
the three and nine months ended September 30, 2022 compared to the prior year,
due to higher market interest rates. Foreign exchange gains during the three and
nine months ended September 30, 2022 and 2021 were related to changes in the
exchange rate between the Swedish Krona and the U.S. dollar as well as between
the Chinese Yuan and the U.S. dollar.
Expense for Income Taxes
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Expense for income taxes $ (434 ) $ 5 $ (396 ) $ 17
Effective tax rate (28.2 )% 0.7 % (93.6 )% (11.3 )%
We recorded an income tax benefit of $0.4 million for the nine months ended
September 30, 2022 and income tax expense of $17 for the nine months ended
September 30, 2021 . The income tax benefit recorded for the nine months ended
September 30, 2022 differs from the statutory rate primarily because it reflects
a $0.4 million benefit related to a partial reversal of the valuation allowance,
established in connection with the acquisition of Smarteq, for Swedish net
deferred tax assets. The expense recorded for the nine months ended September
30, 2021 differed from the Federal statutory rate of 21% primarily because we
maintained a full valuation allowance on our deferred tax assets.
On a regular basis, we evaluate the recoverability of deferred tax assets and
the need for a valuation allowance. Such evaluations involve the application of
significant judgment. We considered multiple factors in our evaluation of the
need for a valuation allowance. The valuation allowance against our deferred tax
assets was $14.2 million at September 30, 2022 and $15.0 million at December 31,
2021 . At September 30, 2022 , the deferred tax assets consist of U.S. deferred
tax assets of $11.9 million and Non-U.S. deferred tax assets of $2.7 million .
We recorded pretax book income for the nine months ended September 30, 2022 and
pretax book income during 2021. Based on a three-year cumulative income for the
Sweden jurisdiction, a sequential increase in pre-tax profits during 2022 and a
higher revenue and profit forecast for 2023 supported by new customer contracts,
we partially reversed the valuation allowance for net deferred tax assets for
the Sweden jurisdiction and recorded an income tax benefit of $0.4 million
because we believe that we will be able to utilize a portion of the net
operating losses in the Sweden jurisdiction. For U.S. deferred tax assets, we
believe our financial outlook remains positive. However, recent macroeconomic
trends, including the current environment of inflationary pressures, an economic
downturn and potential for a recession have created a high level of uncertainty.
Due to this uncertainty, as well as difficulties with forecasting financial
results historically, we maintained a full valuation allowance on our U.S. and
Chinese deferred tax assets at September 30, 2022 . The analysis that we prepared
to determine the valuation allowance required significant judgment and
assumptions regarding future market
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conditions as well as forecasts for profits, taxable income, and taxable income
by jurisdiction. Due to the sensitivity of the analysis, changes to the
assumptions in subsequent periods could have a material effect on the valuation
allowance. See Note 13 to the condensed consolidated financial statements for
more information related to income taxes.
Net Income (Loss)
We recorded net income of$2.0 million for the three months endedSeptember 30, 2022 compared to a net income of$0.7 million for the same period in 2021, as higher gross profits from an increase in revenues offset higher operating expenses. Operating expenses were higher by$1.0 million due to higher expenses for incentive compensation expenses and travel expenses. We recorded a net income of$0.8 million for the nine months endedSeptember 30, 2022 compared to a net loss of$0.2 million for the same period in 2021, as higher profits from an increase in revenues and higher other income offset higher operating expenses. Operating expenses were higher by$3.9 million for the nine months endedSeptember 30, 2022 compared to the same period in 2021 due to higher restructuring expenses of$1.3 million , higher sales and marketing expenses of$1.4 million , and higher general and administrative expenses of$1.2 million . Other income increased due to higher interest income and foreign exchange gains. We recorded an income tax benefit of$0.4 million related to a partial reversal of the valuation allowance for net deferred tax assets related to our Swedish jurisdiction.
Liquidity and Capital Resources
Nine Months Ended
2022 2021
Net cash flow provided by (used in): Operating activities $ 1,421 $ 6,371 Investing activities $ (135 ) $ 4,259 Financing activities$ (3,088 ) $ (6,631 ) Net (decrease) increase in cash and cash equivalents$ (1,802 ) $ 3,999 September 30, December 31, 2022 2021
Cash and cash equivalents at the end of period $ 5,858 $
8,192
Short-term investments at the end of period
22,562
Working capital at the end of period$ 49,850 $ 48,620 Overview Our primary source of liquidity is cash provided by operations, with short-term swings in liquidity supported by a significant balance of cash and short-term investments. The balance has fluctuated with cash from operations, acquisitions and divestitures, payment of dividends and the repurchase of our common shares.
Within operating activities, we are historically a net generator of operating funds from our income statement activities. During periods of expansion, we expect to use cash from our balance sheet.
Within investing activities, capital spending historically ranges between 2.0% and 4.0% of our revenues and the primary use of capital is for manufacturing, engineering, and product development. We historically have made significant transfers between investments and cash as we rotate our large cash balances and short-term investment balances between money market funds, which are accounted for as cash equivalents, and other investment vehicles. We have a history of supplementing our organic revenue with acquisitions of product lines or companies, resulting in significant uses of our cash and short-term investment balances from time to time. We expect the historical trend for capital spending and the variability caused by moving money between cash and investments and periodic merger and acquisition activity to continue in the future. Within financing activities, we have historically generated funds from the exercise of stock options and proceeds from the issuance of common stock through the ESPP. We have historically used funds to issue dividends and we periodically repurchase shares of our common stock through share repurchase programs. We used$3.2 million for the repurchase of shares during 2021. Share repurchases were funded with cash on hand. AtSeptember 30, 2022 , our cash, cash equivalents, and short-term investments were approximately$28.0 million , and we had working capital of$49.9 million . Throughout the COVID-19 pandemic, we have proactively managed our costs and our working capital in order to protect our financial position and maintain our workforce. Management believes our cash and investments provide adequate liquidity 33 --------------------------------------------------------------------------------
and working capital for the next twelve months from the date of the Quarterly Report on Form 10-Q to support our operations given our historic ability to generate free cash flow (cash flow from operations less capital spending).
Operating Activities:
Operating activities generated$1.4 million of cash during the nine months endedSeptember 30, 2022 . We generated$6.1 million of cash from our statement of operations and used$4.7 million for the balance sheet. The balance sheet reflects a net use of cash primarily due to net increases in accounts receivable and inventories. Accounts receivable increased by$2.1 million during the nine months endedSeptember 30, 2022 due to higher sequential revenues. Net inventories were$3.4 million higher atSeptember 30, 2022 compared to year end 2021 as a result of increases in inventories for both test & measurement products and antennas and Industrial IoT devices. Inventories were higher because we made some strategic decisions to increase our inventories to keep us in front of supply chain constraints and also because of temporary delays with certain antenna customer orders due to their supply chain constraints with chipsets. Operating activities generated$6.4 million of cash during the nine months endedSeptember 30, 2021 . We generated$4.3 million of cash from our statement of operations and$2.1 million from the balance sheet. The balance sheet was a net source of cash as accounts receivable collections offset the impact of higher inventories. Accounts receivable decreased by$2.2 million primarily due to lower days sales outstanding on outstanding invoices. Inventories increased by approximately$1.7 million in order to maintain customer service levels while the Company manages supply chain delays and component shortages for both product lines. Investing Activities: Our investing activities used$0.1 million of cash during the nine months endedSeptember 30, 2022 . During the nine months endedSeptember 30, 2022 , redemptions and maturities of our investments provided$22.4 million in funds and we rotated$22.0 million of cash into new investments. We used$0.6 million for capital expenditures during the nine months endedSeptember 30, 2022 . Our investing activities provided$4.3 million of cash during the nine months endedSeptember 30, 2021 . InApril 2021 , the Company used$6.3 million for the purchase of Smarteq, net of cash acquired. During the nine months endedSeptember 30, 2021 , redemptions and maturities of our investments provided$33.7 million in funds and we rotated$21.1 million of cash into new investments. We used$2.0 million for capital expenditures during the nine months endedSeptember 30, 2021 .
Financing Activities:
We used$3.1 million in cash for financing activities during the nine months endedSeptember 30, 2022 . We used$3.0 million for quarterly cash dividends and$0.4 million for payroll taxes related to restricted stock awards. This was offset by proceeds from the issuance of common stock for our ESPP, which provided$0.4 million for the nine months endedSeptember 30, 2022 . We used$6.6 million in cash for financing activities during the nine months endedSeptember 30, 2021 . We used$3.0 million for quarterly cash dividends,$3.2 million for share repurchases, and$0.8 million for payroll taxes related to stock-based compensation in this period. The tax payments related to restricted stock awards. this was offset by proceeds from the issuance of common stock for our ESPP, which provided$0.4 million for the nine months endedSeptember 30, 2021 . Material Cash Requirements
Our material cash requirements from known contractual and other obligations primarily relate to non-cancelable purchase obligations. Expected timing of those payments are as follows:
Payments Due by Period
Less than After
Total 1 year 1-3 years 4-5 years 5 years
Purchase obligations $ 24,713 $ 23,180 $ 1,532 $ 1 $ 0 Critical Accounting Policies and Estimates
We use certain critical accounting policies as described in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" of the 2020 Form 10-K. There have been no material changes in
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any of our critical accounting policies since
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