Revenue growth of 33% compared to the prior
quarter
Westell Technologies, Inc. (NASDAQ: WSTL), a leading provider of
in-building wireless, intelligent site management, cell site
optimization, and outside plant solutions, today announced results
for its fiscal 2015 fourth quarter ended March 31, 2015.
Consolidated revenue was $18.6 million, consisting of $7.1
million from the In-Building Wireless (IBW) segment and $11.5
million from the Communication Solutions Group (CSG) segment.
“Despite conservative capital spending by the major North
American wireless service providers, our fiscal fourth quarter
performance experienced steady improvement in order momentum and a
solid increase in overall revenue,” said Tom Gruenwald, CEO of
Westell Technologies. “Orders are off to a good start so far in the
fiscal first quarter and we are continuing our relentless focus on
improving profit margins and cash flow. We are also preparing for
the release of a new IBW product that we plan on announcing by
quarter-end.”
On a GAAP basis, the Company recorded a net loss in the quarter
ended March 31, 2015 of $13.0 million or $0.22 per share, compared
to a net loss of $27.5 million or $0.46 per share in the quarter
ended December 31, 2014. The current quarter GAAP results included
$5.3 million of charges, consisting of $3.2 million for the
previously announced restructuring and $2.1 million related to the
departure of the former CEO. The prior quarter GAAP results
included a $20.5 million non-cash charge for goodwill
impairment.
On a non-GAAP basis, the Company recorded a net loss of $5.5
million or $0.09 per share, compared to a non-GAAP net loss of $4.8
million or $0.08 per share in the prior quarter. The larger
sequential non-GAAP net loss was primarily due to an unusually low
gross margin in the current quarter, primarily as a result of
higher-than-normal excess and obsolete inventory costs. Please
refer to the schedule at the end of this release for a complete
GAAP to non-GAAP reconciliation and other information related to
non-GAAP measures.
Cash and short-term investments were $37.9 million at
March 31, 2015, compared to $42.9 million at December 31,
2014. The decrease was driven by the net loss and employee
severance payments.
In-Building Wireless (IBW)
Segment
IBW segment revenue was $7.1 million in the quarter ended
March 31, 2015, up 31% from $5.4 million in the quarter ended
December 31, 2014. The sequential revenue increase was driven by
record quarterly sales of our active DAS conditioner or UDIT
(Universal DAS Interface Tray). Gross profit was $1.6 million and
gross margin was 23.0%, compared to $1.9 million and 35.3% in the
prior quarter. Gross profit and gross margin decreased largely as a
result of higher excess and obsolete inventory costs. IBW R&D
expenses were $2.3 million in both the current and prior quarter.
As a result, IBW segment loss was $0.7 million, compared to $0.4
million in the quarter ended December 31, 2014.
Communication Solutions Group (CSG)
Segment
CSG segment revenue was $11.5 million in the quarter ended
March 31, 2015, up 34% from $8.6 million in the quarter ended
December 31, 2014. The sequential revenue increase was driven by
higher sales of tower mounted amplifiers (TMAs) and system
integration projects, partly offset by lower intelligent site
management (ISM) revenue. Gross profit was $3.0 million and gross
margin was 26.4% compared to $2.5 million and 28.8% in the prior
quarter. Gross profit increased due to the higher revenue while
gross margin decreased due primarily to a less favorable mix. CSG
R&D expenses were $1.9 million, compared to $2.0 million in the
prior quarter. As a result, CSG segment profit was $1.1 million,
compared to $0.5 million in the quarter ended December 31,
2014.
Conference Call
Information
Management will discuss financial and business results during
the quarterly conference call on Thursday, May 21, 2015, at 9:30 AM
Eastern Time. Investors may quickly register online in advance of
the call at http://www.directeventreg.com/registration/event/8390567.
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. A
participant may also register by telephone by dialing +1 (888)
869-1189 or +1 (706) 643-5902 no later than 9:15 AM Eastern Time on
May 21, and using confirmation number 8390567.
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: http://www.westell.com. A digital recording of the
entire conference will be available for replay on Westell's website
by approximately 1:00 PM Eastern Time after the call ends.
About Westell
Westell Technologies, Inc., headquartered in Aurora, Illinois,
is a leading provider of in-building wireless, intelligent site
management, cell site optimization, and outside plant solutions
focused on innovation and differentiation at the edge of
telecommunication networks, where end users connect. The Company's
comprehensive set of products and solutions enable
telecommunication service providers, cell tower operators, and
other network operators to reduce operating costs and improve
network performance. 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), 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, 2014, 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 March 31, Twelve Months Ended
March 31,
2015
2014 (adjusted (1)
(2))
2015
2014 (adjusted (1)
(2))
Revenue
$ 18,613 $ 24,421
$ 84,127 $
102,073 Gross profit
4,666 8,090
26,810 40,461 Gross
margin
25.1 % 33.1 %
31.9 % 39.6 %
Operating expenses: Sales & marketing
3,343 3,555
12,407 13,304 Research & development
4,220 3,494
17,348 11,339 General & administrative
5,547
3,827
14,678 14,027 Intangibles amortization
1,520
1,301
6,377 4,889 Restructuring
3,188
(3)
62
3,243
(3)
335 Goodwill impairment
— —
31,102
(4)
—
Total operating expenses
17,818 12,239
85,155 43,894 Operating loss from continuing
operations
(13,152 ) (4,149 )
(58,345 )
(3,433 ) Other income (expense), net
(18 ) 7
(2 ) (56 ) Loss before income taxes and discontinued
operations
(13,170 ) (4,142 )
(58,347 )
(3,489 ) Income tax benefit (expense)
31 8,585
(5)
201 8,460
(5)
Net income (loss) from continuing operations
(13,139
) 4,443
(58,146 ) 4,971 Income
(loss) from discontinued operations, net of income tax
139
(6 )
139 (45 ) Net income (loss)
$
(13,000 ) $ 4,437
$ (58,007
) $ 4,926 Basic net income (loss) per share: Basic
net income (loss) from continuing operations
$ (0.22
) $ 0.08
$ (0.97 ) $ 0.08 Basic net
income (loss) from discontinued operations
— —
— — Basic net income (loss)
$
(0.22 ) $ 0.08
$ (0.97 )
$ 0.08 Diluted net income (loss) per share: Diluted net
income (loss) from continuing operations
$ (0.22
) $ 0.07
$ (0.97 ) $ 0.08 Diluted net
income (loss) from discontinued operations
— —
— — Diluted net income (loss)
$
(0.22 ) $ 0.07
$ (0.97 )
$ 0.08 Weighted-average number of shares outstanding: Basic
60,286 59,109
59,985 58,786 Diluted
60,286
60,971
59,985 60,048 (1) In the first quarter of
fiscal year 2015, the Company voluntarily changed its method of
accounting for the classification of costs related to shipping and
handling to cost of revenue. In previous periods, these shipping
and handling costs were included as a component of sales and
marketing expenses. Previously reported amounts for fiscal year
2014 have been restated to reflect this change. The Company filed
the preferability letter regarding the change in accounting
principle as an exhibit to its June 30, 2014 Form 10-Q. (2)
The results of operations relating to CSI are included in the
Company's Consolidated Financial Statements from the March 1, 2014,
acquisition date. Certain amounts have been adjusted to reflect
measurement period adjustments related to the CSI acquisition.
(3) The Company recorded restructuring expense primarily
relating to abandonment of excess office space at its headquarters.
(4) The Company recorded a non-cash charge of $31.1 million
to record an impairment of the full carrying amount of goodwill.
(5) In fiscal year 2014, the Company acquired Kentrox and
CSI in stock transactions. Deferred tax liabilities of $8.8 million
resulted from the acquisitions relating primarily to acquired
intangible assets. The Company's anticipated ability to realize
deferred tax assets from the reversal of these deferred tax
liabilities resulted in a partial reversal of valuation allowance
related to the Company's deferred tax assets. Income tax expense,
excluding the impact of the acquisitions noted above, was primarily
from state income tax expense in non-unitary states and state taxes
based on gross margin, not taxable income.
Westell Technologies, Inc.
Condensed Consolidated Balance
Sheets
(Amounts in thousands)
(Unaudited)
March 31, 2015 March 31, 2014
Assets: (adjusted (1)) Cash and cash
equivalents
$ 14,026 $ 35,793 Short-term investments
23,906 15,584 Accounts receivable, net
11,845 15,831
Inventories
16,205 24,056 Prepaid expenses and other current
assets
3,285 1,952 Deferred income tax assets
973 899
Land held-for-sale
264
264
Total current assets
70,504
94,379
Property and equipment, net
3,603
2,681
Goodwill
— 31,102 Intangible assets, net
25,942
32,319 Other non-current assets
258 393 Total
assets
$ 100,307 $ 160,874
Liabilities and Stockholders’ Equity: Accounts payable
$ 4,011 $ 7,508 Accrued expenses
4,131 7,315
Accrued restructuring
1,161 57 Contingent consideration
1,184 2,067 Deferred revenue
2,415 1,774
Total current liabilities
12,902 18,721 Deferred
revenue non-current
751 787 Deferred income tax liability
1,019 1,072 Accrued restructuring non-current
1,642 0
Contingent consideration non-current
400 574 Other
non-current liabilities
409 528 Total
liabilities
17,123 21,682 Total stockholders’ equity
83,184 139,192 Total liabilities and
stockholders’ equity
$ 100,307 $ 160,874
(1) Certain amounts have been adjusted to reflect
measurement period adjustments related to the CSI acquisition.
Westell Technologies, Inc.
Condensed Consolidated Statement of
Cash Flows
(Amounts in thousands)
(Unaudited)
Twelve Months Ended March 31, 2015
2014 (adjusted
(1))
Cash flows from operating activities: Net income (loss)
$ (58,007 ) $ 4,926 Reconciliation of net
income to net cash provided by (used in) operating activities:
Depreciation and amortization
7,416 5,511 Goodwill
impairment
31,102 — Stock-based compensation
2,605
1,871 Restructuring
3,243 335 Deferred taxes
(127
) (8,990 ) Other
140 41 Changes in assets and
liabilities: Accounts receivable
3,986 (2,139 ) Inventories
8,186 595 Accounts payable and accrued expenses
(6,912 ) (1,081 ) Other
(919 ) 528
Net cash provided by (used in) operating activities
(9,287 ) 1,597
Cash flows from investing
activities: Net purchases of short-term investments and debt
securities
(8,322 ) 8,765 Acquisitions, net of cash
acquired
(304 ) (66,170 ) Purchases of property and
equipment
(2,137 ) (443 ) Changes in restricted cash
— 2,500 Net cash used in investing activities
(10,763 ) (55,348 )
Cash flows from financing
activities: Payment of contingent consideration
(1,104
) — Purchase of treasury stock
(863 )
(359 ) Proceeds from stock options exercised
257
1,677 Net cash provided by (used in) financing activities
(1,710 ) 1,318
(Gain) loss of exchange rate
changes on cash (7 ) (7 )
Net decrease in cash
and cash equivalents (21,767 ) (52,440 )
Cash
and cash equivalents, beginning of period 35,793
88,233
Cash and cash equivalents, end of period
$ 14,026 $ 35,793 (1) Certain
amounts have been adjusted to reflect measurement period
adjustments related to the CSI acquisition.
Westell Technologies, Inc.
Segment Statement of Operations
(Amounts in thousands)
(Unaudited)
Three Months Ended March 31, 2015 IBW
CSG Total
Revenue
$ 7,082 $ 11,531 $
18,613 Cost of revenue
5,456 8,491
13,947 Gross profit
1,626 3,040
4,666 Gross margin
23.0 % 26.4 %
25.1 % Operating expenses: Research & development
2,315 1,905 4,220 Segment
(loss) profit
$ (689 ) $ 1,135
446 Sales & marketing
3,343 General &
administrative
5,547 Intangible amortization
1,520
Restructuring (1)
3,188 Operating loss
(13,152
) Other expense
(18 ) Income tax (expense)
benefit
31 Net loss from continuing operations
$ (13,139 )
Three Months Ended March 31, 2014
(adjusted (2))
IBW CSG Total Revenue $ 8,218 $ 16,203 $ 24,421 Cost
of revenue 5,631 10,700 16,331 Gross profit
2,587 5,503 8,090 Gross margin 31.5 % 34.0 % 33.1 % Operating
expenses: Research & development 807 2,687 3,494
Segment profit $ 1,780 $ 2,816 4,596 Sales
& marketing 3,555 General & administrative 3,827
Restructuring 62 Intangible amortization 1,301 Operating
loss (4,149 ) Other income 7 Income tax (expense) benefit (3) 8,585
Net income from continuing operations $ 4,443 (1)
The Company recorded restructuring expense primarily
relating to abandonment of excess office space at its headquarters.
(2) Certain amounts have been adjusted to reflect measurement
period adjustments related to the CSI acquisition. (3) In fiscal
year 2014, the Company acquired Kentrox and CSI in stock
transactions. Deferred tax liabilities of $8.8 million resulted
from the acquisitions relating primarily to acquired intangible
assets. The Company's anticipated ability to realize deferred tax
assets from the reversal of these deferred tax liabilities resulted
in a partial reversal of valuation allowance related to the
Company's deferred tax assets. Income tax expense, excluding the
impact of the acquisitions noted above, was primarily from state
income tax expense in non-unitary states and state taxes based on
gross margin, not taxable income.
Westell Technologies, Inc.
Segment Statement of Operations
(Amounts in thousands)
(Unaudited)
Twelve Months Ended March 31, 2015 IBW
CSG
Total Revenue
$ 37,714 $ 46,413
$ 84,127 Cost of revenue
23,999
33,318 57,317 Gross profit
13,715 13,095 26,810 Gross margin
36.4
% 28.2 % 31.9 % Operating
expenses: Research & development
8,955
8,393 17,348 Segment profit
$
4,760 $ 4,702 9,462 Sales
& marketing
12,407 General & administrative
14,678 Intangible amortization
6,377 Restructuring
(1)
3,243 Goodwill impairment (2)
31,102
Operating loss
(58,345 ) Other expense
(2
) Income tax (expense) benefit
201
Net loss from continuing operations
$
(58,146
)
Twelve Months Ended March 31, 2014
(adjusted (3))
IBW CSG Total Revenue $ 13,096 $
88,977 $ 102,073 Cost of revenue 8,935 52,677 61,612
Gross profit 4,161 36,300 40,461 Gross margin 31.8 % 40.8 %
39.6 % Operating expenses: Research & development 1,360
9,979 11,339 Segment profit $ 2,801 $ 26,321
29,122 Sales & marketing 13,304 General &
administrative 14,027 Intangible amortization 4,889 Restructuring
335 Operating loss (3,433 ) Other expense (56 ) Income tax
(expense) benefit (4) 8,460 Net income from continuing
operations $ 4,971 (1) The Company recorded
restructuring expense primarily relating to abandonment of excess
office space at its headquarters. (2) The Company recorded a
non-cash charge of $31.1 million to record an impairment of the
full carrying amount of goodwill. (3) Certain amounts have been
adjusted to reflect measurement period adjustments related to the
CSI acquisition. (4) In fiscal year 2014, the Company acquired
Kentrox and CSI in stock transactions. Deferred tax liabilities of
$8.8 million resulted from the acquisitions relating primarily to
acquired intangible assets. The Company's anticipated ability to
realize deferred tax assets from the reversal of these deferred tax
liabilities resulted in a partial reversal of valuation allowance
related to the Company's deferred tax assets. Income tax expense,
excluding the impact of the acquisitions noted above, was primarily
from state income tax expense in non-unitary states and state taxes
based on gross margin, not taxable income.
Westell Technologies, Inc.
Reconciliation of GAAP to non-GAAP
Financial Measures
(Amounts in thousands, except per share
amounts)
(Unaudited)
Three Months Ended March 31, Twelve Months
Ended March 31,
2015 2014 (adjusted)
2015
2014 (adjusted) GAAP net income (loss)
$
(13,000 ) $ 4,437
$ (58,007 ) $
4,926 Adjustments: Inventory fair value step-up (1)
36 971
576 2,298 Deferred revenue adjustment (1)
64 169
386 2,089 Amortization of intangibles (2)
1,520 1,301
6,377 4,889 Income taxes (3)
— (8,824 )
—
(8,824 ) Restructuring (4)
3,188 62
3,243 335 CEO
severance (5)
1,801 —
1,801 — Stock-based
compensation (6)
977 578
2,605 1,871 Land impairment
108 —
108 — Goodwill impairment (7)
— —
31,102 — (Income) loss from discontinued operations (8)
(227
) 6
(227
) 45 Total adjustments
7,467
(5,737 )
45,971
2,703 Non-GAAP net income (loss)
$
(5,533
) $ (1,300 )
$
(12,036
) $ 7,629 GAAP net income (loss) per common share:
Basic
$ (0.22 ) $ 0.08
$ (0.97
) $ 0.08 Diluted
$ (0.22 ) $ 0.07
$ (0.97 ) $ 0.08 Non-GAAP net income (loss)
per common share: Basic
$ (0.09 ) $ (0.02 )
$ (0.20 ) $ 0.13 Diluted
$ (0.09
) $ (0.02 )
$ (0.20 ) $ 0.13 Average
number of common shares outstanding: Basic
60,286 59,109
59,985 58,786 Diluted
60,286 60,971
59,985
60,048 Three Months Ended March 31, Twelve Months Ended
March 31,
2015 2014
2015 2014 GAAP operating expenses
17,818 12,239
85,155 43,894 Adjustments: Amortization
of intangibles (2)
(1,520 ) (1,301 )
(6,377
) (4,889 ) Restructuring (4)
(3,188 ) (62 )
(3,243 ) (335 ) CEO severance (5)
(1,801
) — (1,801 ) — Stock-based
compensation (6)
(953 ) (560 )
(2,516 )
(1,818 ) Land impairment
(108 ) — (108
) — Goodwill impairment (7)
— —
(31,102 ) — Total adjustments
(7,570
) (1,923 )
(45,147 ) (7,042 ) Non-GAAP
operating expense
10,248 10,316
40,008
36,852
Three Months Ended March 31,
2015 Three Months Ended December 31, 2014
Revenue Gross Profit
Gross Margin Revenue Gross Profit
Gross Margin GAAP - consolidated
$ 18,613
$ 4,666 25.1 % $ 14,043 4,395 31.3 %
Deferred revenue adjustment (1)
64 64 64 64 Inventory
fair value step-up (1)
— 36 — 79 Stock-based
compensation (6)
— 24 — 22
Non-GAAP - consolidated
18,677 4,790
25.6 % 14,107 4,560 32.3 %
The Company prepares its financial statements based on U.S.
Generally Accepted Accounting Principles (GAAP). The schedules
above reconcile the Company's GAAP financial measures to the most
directly comparable GAAP measure. Management believes that non-GAAP
operating results provide meaningful supplemental information to
investors. Management also believes that the non-GAAP results
reflect the Company's core 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.
(1) On April 1, 2013 and on March 1, 2014, the Company
purchased Kentrox and CSI, respectively, which required the step-up
of certain assets to fair value, which resulted in cost that will
not recur once those assets have fully settled. The adjustments
remove the increased costs associated with the third-party sales of
inventory that was stepped-up and the step-down on acquired
deferred revenue that was recognized in the periods presented. (2)
Amortization of intangibles is a non-cash expense arising from the
acquisition of intangible assets. (3) In fiscal year 2014, the
Company acquired Kentrox and CSI in stock transactions. Deferred
tax liabilities of $8.8 million resulted from the acquisitions
relating primarily to acquired intangible assets. The Company's
anticipated ability to realize deferred tax assets from the
reversal of these deferred tax liabilities resulted in a partial
reversal of valuation allowance related to the Company's deferred
tax assets. The fiscal year 2014 adjustment removes the related
income tax benefit. The Company is in a full valuation allowance in
fiscal year 2014. The fiscal year 2013 adjustment removes the tax
benefits recorded in fiscal year 2013 to reflect the tax result had
the Company been in a full valuation allowance in fiscal year 2013.
(4) Restructuring expenses are not directly related to the ongoing
performance of our fundamental business operations. (5) The Company
recorded severance benefits related to the departure of the former
CEO. (6) Stock-based compensation is a non-cash expense incurred in
accordance with share-based compensation accounting. (7) The
Company recorded a non-cash charge of $31.1 million during fiscal
2015 to record the impairment of the full carrying value of the
Company's goodwill. (8) Historical results of operations of the CNS
division and ConferencePlus are presented as discontinued
operations.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150520006529/en/
Westell Technologies, Inc.Tom MinichielloChief Financial
Officer+1 (630) 375-4740tminichiello@westell.com
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