Attached files

file filename
8-K - 8-K - WESTELL TECHNOLOGIES INCa3q138kearningsrelease.htm



Westell News Release

News Release: FOR IMMEDIATE RELEASE

For additional information, contact:
Brian Cooper
Chief Financial Officer
Westell Technologies, Inc.
630.375.4740 BCooper@westell.com

Westell Technologies Reports Fiscal Third Quarter Results
 
Third quarter revenue for the Westell Division rose 16%, to $8.9 million

New products in distributed antenna systems (DAS), Ethernet and cell-site optimization more than doubled to 11% of total revenue

Cash and short-term investments were $119.2 million at December 31, 2012

The company repurchased 1.4 million shares for $2.9 million during the quarter

AURORA, IL, February 4, 2013 – Westell Technologies, Inc. (NASDAQ: WSTL), a leading provider of telecommunications equipment for wireline, wireless and home networks, today announced results for its fiscal 2013 third quarter ended December 31, 2012. Consolidated revenue from continuing operations was $8.9 million. The net loss for the quarter was $2.0 million, equal to $0.03 per share. The non-GAAP net loss for the third quarter was $1.4 million, equal to $0.02 per share.

New Products Lift Division Revenues, Reflect Growth Strategy

“The most important takeaway for the quarter is the growing acceptance of the new wireless network products that we have brought to market over the last year,” said Chairman and CEO Rick Gilbert. “In the face of a seasonally slow quarter, sales of these new lines increased significantly and were the primary reason for the 16% year-over-year growth in Westell Division revenue.”

“This validates our growth strategy to expand and diversify Westell's revenue by using new products to build market share,” Gilbert explained. “We intend to add products for wireless networks through internal development, which is driven by customer feedback, and fold-in acquisitions. Realigning our sales efforts





has fueled our momentum, and our advances should be supported by making steady progress in qualifying new products with additional customers.”

Westell's new products for wireless networks include distributed antenna systems (DAS) products, Ethernet network interface units and switches, and tower-mounted amplifiers. These new products contributed 11% of total revenue during the fiscal 2013 third quarter.

Lower Consolidated Results Reflect Wind-Down of Non-Core Business

Consolidated revenue from continuing operations for the latest quarter was $8.9 million, compared to $14.4 million in the prior-year period. The decrease reflected the planned wind-down of sales in the company's Customer Networking Solutions (CNS) Division.

The net loss for the third quarter was $2.0 million, equal to $0.03 per share, compared to net income of $19.8 million, equal to $0.29 per share, in the same quarter last year. Prior-year net income included $20.3 million of income from discontinued operations that related to the Conference Plus Division, including a gain on the sale of the division. The latest quarter included a $0.6 million loss from discontinued operations, which reflected charges associated with a pending indemnity claim, partially offset by an unrelated tax benefit. On a non-GAAP basis, net loss for the fiscal 2013 third quarter was $1.4 million, equal to $0.02 per share, compared to a non-GAAP net loss of $0.5 million, equal to $0.01 per share, in the year-ago quarter.

Westell Division Benefits from New and Traditional Product Sales

Revenue for the Westell Division was $8.9 million in the fiscal third quarter, up 16% from $7.7 million in the prior-year period. The increase was driven primarily by sales of new products, although traditional product categories also improved. Gross margin was 34.8% and was comparable to the prior-year period. Operating expenses were $4.4 million, up $1.1 million from the prior-year period, reflecting higher cost allocations and increases to support sales and development of new products. On this basis, the division reported a fiscal third quarter operating loss of $1.3 million, compared to an operating loss of $0.6 million in the same quarter of the prior year.

The CNS Division recorded revenue of $0.1 million in the fiscal third quarter, compared to $6.7 million in the same quarter last year. The decline reflects completion of the planned wind-down of sales to the division's remaining customer following the CNS sale transaction. CNS operating expenses in the most recent quarter





declined to $0.4 million as a result of reducing project expenditures following the limited product release for HomecloudTM on September 26, 2012.

Strong Cash Position Helped Fund Share Repurchases

Total cash and short-term investments on December 31, 2012, were $119.2 million, compared to $124.4 million at September 30, 2012. The company repurchased 1.4 million shares at a cost of $2.9 million during the latest quarter.

Conference Call Information

Management will address financial and business results during its third quarter conference call on Tuesday, February 5, 2013, at 9:30 AM Eastern Time. Participants may register for the call at http://www.conferenceplus.com/westell. After doing so, they will receive a dial-in number, a passcode, and a personal identification number (PIN) that automatically joins them to the audio conference. Those who do not wish to register may participate in the call by dialing 888-206-4065 no later than 9:15 AM Eastern Time and using confirmation number 3406 9774#. International participants may dial 630-827-5974.

This news release and related information that may be discussed on the conference call will be posted on the Investor News section of Westell's website: http://www.westell.com. An archive of the entire call will be available on the site via Digital Audio Replay by approximately noon Eastern Time after the call ends. The replay of the conference also may be accessed by dialing 888-843-7419 or 630-652-3042 and entering 6887 757 #.
About Westell

Westell Technologies, Inc., headquartered in Aurora, Illinois, designs, distributes, markets and services a broad range of carrier-class communications equipment. This includes digital transmission, remote monitoring, power distribution, demarcation and cell-site optimization products used by wireline and wireless telecommunications service providers, industrial customers, and home network users. For more information, please visit http://www.westell.com.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
Certain statements contained herein that are not historical facts or that contain the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” “plan,” “should,” or derivatives thereof and other words of similar meaning are forward-looking statements that involve risks and uncertainties.  Actual results may differ materially from those expressed in or implied by such forward-looking statements.  Factors that could cause actual results to differ materially include, but are not limited to, product demand and market acceptance risks, need for financing and capital, economic weakness in the United States (“U.S.”) economy and telecommunications market, the effect of international economic conditions and trade, legal, social and economic risks (such as import, licensing and trade restrictions), the impact of competitive products or technologies, competitive pricing pressures, customer product selection decisions, product cost increases, component supply shortages, new product development, excess and obsolete inventory, commercialization and technological delays or difficulties (including delays or difficulties in developing, producing, testing and selling new products and technologies), the ability to successfully consolidate and rationalize operations, the





ability to successfully identify, acquire and integrate acquisitions, the effect of the company's accounting policies, retention of key personnel and other risks more fully described in the company's SEC filings, including the Form 10-K for the fiscal year ended March 31, 2012, under Item 1A - Risk Factors.  The company undertakes no obligation to publicly update these forward-looking statements to reflect current events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events, or otherwise.


Financial Tables to Follow:






Westell Technologies, Inc.
Condensed Consolidated Statement of Operations
(Amounts in thousands, except per share amounts)
(Unaudited)

 
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
 
2012
 
2011
 
2012
 
2011
Revenue
 
$
8,928

 
$
14,392

 
$
29,380

 
$
58,321

Gross profit
 
3,143

 
4,263

 
10,387

 
18,850

Gross margin
 
35.2
%
 
29.6
%
 
35.4
%
 
32.3
%
Operating expenses:
 
 
 
 
 
 
 
 
Sales & marketing
 
1,807

 
1,414

 
5,515

 
5,108

Research & development
 
1,754

 
1,797

 
5,515

 
5,865

General & administrative
 
2,124

 
1,707

 
7,368

 
5,625

Restructuring
 

 
(2
)
 
149

 
275

Intangibles amortization
 
236

 
136

 
656

 
413

Total operating expenses
 
5,921

 
5,052

 
19,203

 
17,286

Operating income (loss)
 
(2,778
)
 
(789
)
 
(8,816
)
 
1,564

Gain on CNS asset sale
 

 

 

 
31,654

Other income
 
43

 
106

 
134

 
201

Interest (expense)
 

 
(37
)
 

 
(42
)
Income (loss) before income taxes and discontinued operations
 
(2,735
)
 
(720
)
 
(8,682
)
 
33,377

Income tax benefit (expense)
 
1,399

 
268

 
3,431

 
(11,108
)
Net income (loss) from continuing operations
 
(1,336
)
 
(452
)
 
(5,251
)
 
22,269

Income (loss) from discontinued operations, net of income tax
 
(629
)
(1) 
20,254

 
(629
)
(1) 
22,161

Net income (loss)
 
$
(1,965
)
 
$
19,802

 
$
(5,880
)
 
$
44,430

Basic earnings per share:
 
 
 
 
 
 
 
 
Net income (loss) from continuing operations
 
$
(0.02
)

$
(0.01
)

$
(0.09
)

$
0.33

Net income (loss) from discontinued operations
 
(0.01
)

0.30


(0.01
)

0.33

Net income (loss)
 
$
(0.03
)

$
0.30


$
(0.10
)

$
0.66

Diluted earnings per share:
 
 
 
 
 
 
 
 
Net income (loss) from continuing operations
 
$
(0.02
)

$
(0.01
)

$
(0.09
)

$
0.32

Net income (loss) from discontinued operations
 
(0.01
)

0.30


(0.01
)

0.32

Net income (loss)
 
$
(0.03
)

$
0.29


$
(0.10
)

$
0.65

Average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
58,693

 
66,411

 
60,541

 
67,390

Diluted
 
58,693

 
67,332

 
60,541

 
68,656

 

(1)
The company sold ConferencePlus on December 31, 2011. In the quarter ended December 31, 2012, the company recorded an after-tax charge of $0.9 million for a pending indemnification claim related to the ConferencePlus sale transaction and an unrelated tax benefit of $0.3 million that resulted from finalizing income tax filings related to the sale.





Westell Technologies, Inc.
Condensed Consolidated Balance Sheet
(Amounts in thousands)
(Unaudited)
 
 
 
December 31, 2012
 
March 31, 2012
Assets:
 
 
 
 
Cash and cash equivalents
 
$
89,823

 
$
120,832

Restricted cash
 
4,104

 
7,451

Short-term investments
 
25,223

 
14,455

Accounts receivable, net
 
4,936

 
5,710

Inventories
 
11,507

 
9,906

Prepaid expenses and other current assets
 
2,620

 
1,456

Deferred income taxes
 
2,576

 
1,859

Total current assets
 
140,789

 
161,669

Property and equipment, net
 
1,143

 
1,197

Goodwill
 
2,860

 
801

Intangibles, net
 
5,299

 
2,728

Deferred income taxes
 
33,719

 
30,740

Other assets
 
509

 
291

Total assets
 
$
184,319

 
$
197,426

Liabilities and Stockholders’ Equity:
 
 
 
 
Accounts payable
 
$
4,116

 
$
3,142

Accrued expenses
 
4,552

 
3,328

Total current liabilities
 
8,668

 
6,470

Tax contingency reserve long-term
 
3,484

 
3,483

Contingent consideration long-term
 
2,221

 

Other long-term liabilities
 
968

 
1,109

Total liabilities
 
15,341

 
11,062

Total stockholders’ equity
 
168,978

 
186,364

Total liabilities and stockholders’ equity
 
$
184,319

 
$
197,426






Westell Technologies, Inc.
Condensed Consolidated Statement of Cash Flows
(Amounts in thousands)
(Unaudited)
 
 
 
Nine Months Ended December 31,
 
 
2012
 
2011
Cash flows from operating activities:
 
 
Net income (loss)
 
$
(5,880
)
 
$
44,430

Reconciliation of net income (loss) to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
1,023

 
1,781

Stock-based compensation
 
1,062

 
922

Gain on CNS asset sale
 

 
(31,654
)
Gain on Sale of ConferencePlus, net of tax
 

 
(19,980
)
Restructuring
 
149

 
942

Deferred taxes
 
(3,696
)
 
13,999

Other
 
(7
)
 
(305
)
Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
772

 
12,671

Inventory
 
(1,286
)
 
623

Accounts payable and accrued expenses
 
1,064

 
(26,573
)
Other
 
(1,406
)
 
177

Net cash provided by (used in) operating activities
 
(8,205
)
 
(2,967
)
Cash flows from investing activities:
 
 
 
 
Net purchases of short-term investments and debt securities
 
(10,768
)
 
(20,219
)
Proceeds from CNS asset sale
 

 
36,683

Proceeds from the sale of ConferencePlus, net of cash transferred
 

 
40,331

Payment for business acquisition
 
(2,524
)
 

Purchases of property and equipment, net
 
(305
)
 
(779
)
Proceeds from the sale of non-operating assets
 

 
325

Changes in restricted cash
 
3,347

 
(7,449
)
Net cash provided by (used in) investing activities
 
(10,250
)
 
48,892

Cash flows from financing activities:
 
 
 
 
Purchase of treasury stock
 
(12,642
)
 
(12,553
)
Proceeds from stock options exercised
 
85

 
1,600

Net cash provided by (used in) financing activities
 
(12,557
)
 
(10,953
)
Effect of exchange rate changes on cash
 
3

 
(128
)
Net increase (decrease) in cash
 
(31,009
)
 
34,844

Cash and cash equivalents, beginning of period
 
120,832

 
86,408

Cash and cash equivalents, end of period
 
$
89,823

 
$
121,252






Westell Technologies, Inc.
Segment Statement of Operations
(Amounts in thousands)
(Unaudited)
 
 
 
Three Months Ended December, 2012
 
 
Westell
 
CNS
 
Unallocated
 
Total
Revenue
 
$
8,873

 
$
55

 
$

 
$
8,928

Gross profit
 
3,090

 
53

 

 
3,143

Gross margin
 
34.8
%
 
96.4
%
 
 
 
35.2
%
Operating expenses:
 
 
 
 
 
 
 
 
Sales & marketing
 
1,862

 
(55
)
 

 
1,807

Research & development
 
1,331

 
423

 

 
1,754

General & administrative
 
938

 
(11
)
 
1,197

 
2,124

Restructuring
 

 

 

 

Intangibles amortization
 
234

 
2

 

 
236

Total operating expenses (1)
 
4,365

 
359

 
1,197

 
5,921

Operating income (loss)
 
$
(1,275
)
 
$
(306
)

(1,197
)
 
(2,778
)
Other income
 
 
 
 
 
43

 
43

Income (loss) before income taxes before discontinued operations
 
 
 
 
 
(1,154
)
 
(2,735
)
Income tax benefit (expense)
 
 
 
 
 
1,399

 
1,399

Net income (loss) from continuing operations
 
 
 
 
 
$
245

 
$
(1,336
)
 

 
 
Three Months Ended December 31, 2011
 
 
Westell
 
CNS
 
Unallocated
 
Total
Revenue
 
$
7,674

 
$
6,718

 
$

 
$
14,392

Gross profit
 
2,650

 
1,613

 

 
4,263

Gross margin
 
34.5
%
 
24.0
%
 
 
 
29.6
%
Operating expenses:
 
 
 
 
 
 
 
 
Sales & marketing
 
1,269

 
145

 

 
1,414

Research & development
 
1,223

 
574

 

 
1,797

General & administrative
 
649

 
200

 
858

 
1,707

Restructuring
 

 
(2
)
 

 
(2
)
Intangibles amortization
 
135

 
1

 

 
136

Total operating expenses (2)
 
3,276

 
918

 
858

 
5,052

Operating income (loss)
 
$
(626
)
 
$
695

 
(858
)
 
(789
)
Other income
 
 
 
 
 
106

 
106

Interest (expense)
 
 
 
 
 
(37
)
 
(37
)
Income (loss) before income taxes before discontinued operations
 
 
 
 
 
(789
)
 
(720
)
Income tax benefit (expense)
 
 
 
 
 
268

 
268

Net income (loss) from continuing operations
 
 
 
 
 
$
(521
)
 
$
(452
)
 
(1)
Includes $0.3 million and $0.0 million of depreciation and amortization expense from the Westell and CNS segments, respectively.
(2)
Includes $0.3 million and $0.0 million of depreciation and amortization expense from the Westell and CNS segments, respectively.





Westell Technologies, Inc.
Segment Statement of Operations
(Amounts in thousands)
(Unaudited)
 
 
Nine Months Ended December 31, 2012
 
 
Westell
 
CNS
 
Unallocated
 
Total
Revenue
 
$
28,145

 
$
1,235

 
$

 
$
29,380

Gross profit
 
9,312

 
1,075

 

 
10,387

Gross margin

33.1
%
 
87.0
%
 
 
 
35.4
%
Operating expenses:
 
 
 
 
 
 
 
 
Sales & marketing
 
5,568

 
(53
)
 

 
5,515

Research & development
 
4,216

 
1,299

 

 
5,515

General & administrative
 
3,232

 
531

 
3,605

 
7,368

Restructuring
 
149

 

 

 
149

Intangibles amortization
 
652

 
4

 

 
656

Total operating expenses (1)
 
13,817

 
1,781

 
3,605

 
19,203

Operating income (loss)
 
$
(4,505
)
 
$
(706
)
 
(3,605
)
 
(8,816
)
Other income
 
 
 
 
 
134

 
134

Income (loss) before income taxes before discontinued operations
 
 
 
 
 
(3,471
)
 
(8,682
)
Income tax benefit (expense)
 
 
 
 
 
3,431

 
3,431

Net income (loss) from continuing operations
 
 
 
 
 
$
(40
)
 
$
(5,251
)
 

 
 
Nine Months Ended December 31, 2011
 
 
Westell
 
CNS
 
Unallocated
 
Total
Revenue
 
$
32,920

 
$
25,401

 
$

 
$
58,321

Gross profit
 
13,090

 
5,760

 

 
18,850

Gross margin
 
39.8
%
 
22.7
%
 
 
 
32.3
%
Operating expenses:
 
 
 
 
 
 
 
 
Sales & marketing
 
4,197

 
911

 

 
5,108

Research & development
 
3,829

 
2,036

 

 
5,865

General & administrative
 
2,071

 
751

 
2,803

 
5,625

Restructuring
 

 
275

 

 
275

Intangibles amortization
 
410

 
3

 

 
413

Total operating expenses (2)
 
10,507

 
3,976

 
2,803

 
17,286

Operating income (loss)
 
$
2,583

 
$
1,784

 
(2,803
)
 
1,564

Gain on CNS asset sale
 
 
 
 
 
31,654

 
31,654

Other income
 
 
 
 
 
201

 
201

Interest (expense)
 
 
 
 
 
(42
)
 
(42
)
Income (loss) before income taxes before discontinued operations
 
 
 
 
 
29,010

 
33,377

Income tax benefit (expense)
 
 
 
 
 
(11,108
)
 
(11,108
)
Net income (loss) from continuing operations
 
 
 
 
 
$
17,902

 
$
22,269

 
(1)
Includes $1.0 million and $0.0 million of depreciation and amortization expense from the Westell and CNS segments, respectively.
(2)
Includes $0.7 million and $0.1 million of depreciation and amortization expense from the Westell and CNS segments, respectively.





Westell Technologies, Inc.
Reconciliation of GAAP to non-GAAP Financial Measures
(Amounts in thousands, except per share amounts)
(Unaudited)
 
 
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
 
2012
 
2011
 
2012
 
2011
GAAP net income (loss)
 
$
(1,965
)
 
$
19,802

 
$
(5,880
)
 
$
44,430

Adjustments:
 
 
 
 
 
 
 
 
CNS asset sale, net of tax (1)
 
(20
)
 

 
316

 
(18,963
)
Income tax benefit (2)
 

 

 

 
(2,101
)
(Income) loss from discontinued operations, net of income tax (3)
 
629

 
(20,254
)
 
629

 
(22,161
)
Total adjustments
 
609

 
(20,254
)
 
945

 
(43,225
)
Non-GAAP net income (loss)
 
$
(1,356
)
 
$
(452
)
 
$
(4,935
)
 
$
1,205

GAAP net income (loss) per common share:
 
 
 
 
 
 
 
 
Basic
 
$
(0.03
)
 
$
0.30

 
$
(0.10
)
 
$
0.66

Diluted
 
$
(0.03
)
 
$
0.29

 
$
(0.10
)
 
$
0.65

Non-GAAP net income (loss) per common share:
 
 
 
 
 
 
 
 
Basic
 
$
(0.02
)
 
$
(0.01
)
 
$
(0.08
)
 
$
0.02

Diluted
 
$
(0.02
)
 
$
(0.01
)
 
$
(0.08
)
 
$
0.02

Average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
58,693

 
66,411

 
60,541

 
67,390

Diluted
 
58,693

 
67,332

 
60,541

 
68,656

The company conforms to U.S. Generally Accepted Accounting Principles (GAAP) in the preparation of its financial statements. This schedule reconciles the company’s GAAP net income to adjusted net income on a non-GAAP basis. Management believes that these non-GAAP results provide meaningful supplemental information to investors and indicate the company's core performance and that they facilitate comparison of results across reporting periods. The company uses these non-GAAP measures when evaluating its financial results. Non-GAAP measures should not be viewed as a substitute for the company’s GAAP results.
 
(1)
On April 15, 2011, the company sold certain assets and transferred certain liabilities of the CNS segment. The adjustments remove the gain on the sale, costs associated with the transaction, and related income tax effects. Fiscal year 2013 amounts reflect the costs of a resolution of a dispute related to the CNS sale.
(2)
Benefit resulting from the release of a reserve for income taxes.
(3)
On December 31, 2011, the ConferencePlus Division was sold. In the quarter ended December 31, 2012, the company recorded an after-tax charge of $0.9 million for a pending indemnification claim related to the ConferencePlus sale transaction and an unrelated tax benefit of $0.3 million that resulted from finalizing income tax filings related to the sale. Historical results of operations of ConferencePlus are presented as discontinued operations.