Westell Reports Fiscal 2019 Third Quarter Results

AURORA, Ill., Feb. 06, 2019 (GLOBE NEWSWIRE) -- Westell Technologies, Inc. (NASDAQ: WSTL), a leading provider of high-performance network infrastructure solutions, announced results for its fiscal 2019 third quarter ended December 31, 2018 (3Q19).  Management will host a conference call to discuss 3Q19 results and plans for future growth tomorrow, Thursday, February 7, 2019, at 9:30 AM Eastern Time (details below).

Revenue was $10.7 million and comprised $2.8 million from the In-Building Wireless (IBW) segment, $5.1 million from the Intelligent Site Management (ISM) segment, and $2.8 million from the Communication Network Solutions (CNS) segment.

“As anticipated, ISM segment revenue rebounded in 3Q19, nearly doubling compared to 2Q19, driving an overall sequential quarterly revenue increase.  Our IBW segment was affected by lower sales of DAS Conditioners.  CNS, while seasonally lower, included increased traction for our new Fiber Access solutions.  We also maintained our consolidated gross margin target of 40% or greater,” said Stephen John, President and Chief Executive Officer.  “Going forward, to meet our growth objectives and drive increased shareholder value, we expect to continue expanding our portfolio of Fiber Access solutions, co-developing an OnGo Small Cell targeted to the private LTE market, and aggressively pursuing inorganic initiatives across all three segments.”

Cash was $27.1 million at December 31, 2018 compared to $28.5 million at September 30, 2018, due primarily to increased working capital and share repurchases.

In-Building Wireless (IBW) Segment

IBW’s segment sequential quarterly revenue decrease was due to lower sales of DAS conditioners and passive system components, partly offset by slight revenue increases for commercial repeaters and public safety products.  IBW’s segment gross margin decrease was due primarily to the lower overall revenue.

Intelligent Site Management (ISM) Segment

ISM’s segment sequential quarterly revenue increase was driven by a rebound in sales of remote units to a major domestic customer that had slowed significantly in the prior quarter and higher software revenue.  ISM’s segment gross margin increase was driven by the revenue increase and a more favorable mix.

Communication Network Solutions (CNS) Segment

CNS product lines are used primarily in the outdoor communication network; consequently, the October to December quarters tend to result in lower revenue.  In 3Q19, CNS’s segment sequential quarterly revenue decrease was most affected by lower sales of Integrated Cabinets and Power Distribution products, partly offset by increased traction of our new Fiber Access solutions.  CNS’s gross margin decrease was primarily due to the lower overall revenue.

Conference Call Information
Management will discuss financial and business results and plans for future growth during the quarterly conference call on Thursday, February 7, 2019, at 9:30 AM Eastern Time.  Investors may quickly register online in advance of the call at https://www.conferenceplus.com/Westell.  After registering, participants receive dial-in numbers, a passcode and a registration ID that is used to uniquely identify their presence and automatically join them into the audio conference.  Participant may also register by telephone on the day of the conference by calling (888) 206-4065 no later than 8:15 AM Central Time (9:15 AM Eastern Time) and providing the operator confirmation number 48142312.

This news release and related information that may be discussed on the conference call will be posted on the Investor Relations section of Westell's website: ir.westell.com.  A digital recording of the entire conference will be available for replay on Westell's website by approximately 12:00 PM Eastern Time following the conclusion of the conference call.

About Westell Technologies
Westell is a leading provider of high-performance network infrastructure solutions focused on innovation and differentiation at the edge of communication networks where end users connect.  The Company's portfolio of products and solutions enable service providers and network operators to improve performance and reduce operating expenses.  With millions of products successfully deployed worldwide, Westell is a trusted partner for transforming networks into high-quality reliable systems. For more information, please visit 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, customer spending patterns, 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, and the imposition of new, or changes in existing duties and tariffs), 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, 2018, 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.

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

(1)  During the quarter ended September 30, 2017, the Company recorded restructuring expense related to severance costs for terminated employees.
(2)  During the quarter ended September 30, 2017, the Company dissolved the NoranTel legal entity which triggered a one-time $0.6 million foreign currency gain with the reversal of the cumulative translation adjustment.
(3)  During the quarter ended December 31, 2017, the Company had an income tax benefit of $697K from the release of the tax valuation allowance associated with previously generated alternative minimum tax (AMT) credits due to the enactment of the Tax Cuts and Jobs Act of 2017.
(4)  During the quarter ended September 30, 2018, the Company recorded indemnification expense related to probable loss contingencies associated with a major customer contract related to a business which was previously sold and therefore is presented as discontinued operations.

Westell Technologies, Inc.
Condensed Consolidated Balance Sheet
(Amounts in thousands)

Westell Technologies, Inc.
Condensed Consolidated Statement of Cash Flows
(Amounts in thousands)
(Unaudited)

⁽¹⁾  During the quarter ended December 31, 2017, the Company had an income tax benefit of $697K from the release of the tax valuation allowance associated with previously generated alternative minimum tax (AMT) credits due to the enactment of the Tax Cuts and Jobs Act of 2017.
⁽²⁾ During the quarter ended September 30, 2017, the Company dissolved the NoranTel legal entity which triggered a one-time $0.6 million foreign currency gain with the reversal of the cumulative translation adjustment.
⁽³⁾  Includes the cumulative effect adjustment of the ASC 606 (Revenue from Contracts with Customers) adoption.
⁽⁴⁾ As of March 31, 2018, and December 31, 2017, the Company had $2.8 million and $4.5 million, respectively, of short-term investments in addition to cash and cash equivalents.

Westell Technologies, Inc.
Segment Statement of Operations
(Amounts in thousands)
(Unaudited)

Sequential Quarter Comparison

Year-over-Year Quarter Comparison

Westell Technologies, Inc.
Reconciliation of GAAP to non-GAAP Financial Measures
(Amounts in thousands, except per share amounts)
(Unaudited)

The Company conforms to U.S. Generally Accepted Accounting Principles (GAAP) in the preparation of its financial statements. The schedules above reconcile the Company's non-GAAP financial measures to the most directly comparable GAAP measure. The adjustments share one or more of the following characteristics: they are unusual and the Company does not expect them to recur in the ordinary course of its business; they do not involve the expenditure of cash; they are unrelated to the ongoing operation of the business in the ordinary course; or their magnitude and timing is largely outside of the Company's control. Management believes that the non-GAAP financial information provides meaningful supplemental information to investors. Management also believes the non-GAAP financial information reflects the Company's core ongoing operating performance and facilitates comparisons 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.

Footnotes:

⁽¹⁾  Stock-based compensation is a non-cash expense incurred in accordance with share-based compensation accounting standards.
⁽²⁾  Amortization of intangibles is a non-cash expense arising from previously acquired intangible assets.
⁽³⁾   Restructuring, separation, and transition expenses are not directly related to the ongoing performance of our fundamental business operations.
⁽⁴⁾  During the quarter ended September 30, 2018, the Company recorded indemnification expense related to probable loss contingencies associated with a major customer contract related to a business which was previously sold and therefore is presented as discontinued operations.
⁽⁵⁾  EBITDA is a non-GAAP measure that represents Earnings Before Interest, Taxes, Depreciation, and Amortization.  The Company presents Adjusted EBITDA.
⁽⁶⁾  Non-recurring foreign currency translation gain related to the wind-up of the NoranTel legal entity during the quarter ended September 30, 2017.
⁽⁷⁾ Adjustment removes one-time tax effect of changes in valuation allowance reserves associated with previously generated alternative minimum tax (AMT) credits due to the Tax Cuts and Jobs Act of 2017.

For additional information, contact:

Tom Minichiello
Chief Financial Officer
Westell Technologies, Inc.
+1 (630) 375 4740
tminichiello@westell.com 

Released February 6, 2019