Westell Technologies Reports Fiscal Third Quarter Results

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, Ill.--(BUSINESS WIRE)-- Westell Technologies, Inc. (NAS: 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 participatein 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)


Three Months Ended December 31,Nine Months Ended December 31,
2012  20112012  2011
Gross profit3,1434,26310,38718,850
Gross margin35.2%29.6%35.4%32.3%
Operating expenses:
Sales & marketing1,8071,4145,5155,108
Research & development1,7541,7975,5155,865
General & administrative2,1241,7077,3685,625
Intangibles amortization236 136 656 413 
Total operating expenses5,921 5,052 19,203 17,286 
Operating income (loss)(2,778)(789)(8,816)1,564
Gain on CNS asset sale31,654
Other income43106134201
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)(2)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:
(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)


December 31, 2012March 31, 2012
Cash and cash equivalents$89,823$120,832
Restricted cash4,1047,451
Short-term investments25,22314,455
Accounts receivable, net4,9365,710
Prepaid expenses and other current assets2,6201,456
Deferred income taxes2,576 1,859
Total current assets140,789161,669
Property and equipment, net1,1431,197
Intangibles, net5,2992,728
Deferred income taxes33,71930,740
Other assets509 291
Total assets$184,319 $197,426
Liabilities and Stockholders' Equity:
Accounts payable$4,116$3,142
Accrued expenses4,552 3,328
Total current liabilities8,6686,470
Tax contingency reserve long-term3,4843,483
Contingent consideration long-term2,221
Other long-term liabilities968 1,109
Total liabilities15,34111,062
Total stockholders' equity168,978 186,364
Total liabilities and stockholders' equity$184,319 $197,426
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Westell Technologies, Inc.

Condensed Consolidated Statement of Cash Flows

(Amounts in thousands)


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 amortization1,0231,781
Stock-based compensation1,062922
Gain on CNS asset sale(31,654)
Gain on Sale of ConferencePlus, net of tax(19,980)
Deferred taxes(3,696)13,999
Changes in assets and liabilities:
Accounts receivable77212,671