Quarterly report pursuant to Section 13 or 15(d)

Interim Segment Information (Notes)

Interim Segment Information (Notes)

6 Months Ended

Sep. 30, 2017

Segment information is presented in accordance with a “management approach", which designates the internal reporting used by the chief operating decision-maker (CODM) for making decisions and assessing performance as the source of the Company's reportable segments. Westell’s Chief Executive Officer is the CODM. The CODM continues to define segment profit as gross profit less research and development expenses. The accounting policies of the segments are the same as those for Westell Technologies, Inc. described in the summary of significant accounting policies included in the Company's Annual Report on Form 10-K for year ended March 31, 2017.

The Company’s three reportable segments are as follows:

In-Building Wireless (IBW) Segment

The IBW segment solutions enable cellular coverage in stadiums, arenas, malls, buildings, and other indoor areas not served well or at all by the existing "macro" outdoor cellular network. For commercial service, the IBW segment solutions include distributed antenna systems (DAS) conditioners and digital repeaters. For the public safety market, the IBW segment solutions include half-watt and two-watt repeaters and a battery backup unit. The Company’s IBW segment also offers ancillary products that consist of passive system components and antennas for both the commercial and public safety markets.

Intelligent Site Management and Services (ISMS) Segment

The ISMS segment solutions include a suite of remote units which provide machine-to-machine (M2M) communications that enable operators to remotely monitor, manage, and control site infrastructure and support systems. Remote units can be and often are combined with the Company’s Optima management software system. The Company also offers support agreement services (i.e., maintenance) and deployment services (i.e., installation).

Communications Network Solutions (CNS) Segment

The CNS segment solutions include a broad range of outdoor network infrastructure offerings consisting of integrated cabinets, power distribution products, copper and fiber connectivity panels, T1 network interface units (NIUs), and tower mounted amplifiers (TMAs).

Segment information for the three and six months ended September 30, 2017, and 2016, is set forth below:



	Three months ended September 30, 2017
(in thousands)	IBW				ISMS			CNS			Total
Revenue	$	7,919			$	4,730		$	4,583		$	17,232
Cost of revenue	4,269				2,511			3,177			9,957
Gross profit	3,650				2,219			1,406			7,275
Gross margin	46.1		%		46.9		%	30.7		%	42.2		%
Research and development	1,443				523			239			2,205
Segment profit	$	2,207			$	1,696		$	1,167		5,070
Operating expenses:
Sales and marketing											1,992
General and administrative											1,809
Intangible amortization											1,048
Restructuring											165
Long-lived assets impairment											—
Operating profit (loss)											56
Other income, net											677
Income tax expense											(13		)
Net income (loss)											$	720

	Three months ended September 30, 2016
(in thousands)	IBW				ISMS			CNS			Total
Revenue	$	6,644			$	5,109		$	6,027		$	17,780
Cost of revenue	4,411			⁽¹⁾	2,702			4,300			11,413			⁽¹⁾
Gross profit	2,233			⁽¹⁾	2,407			1,727			6,367			⁽¹⁾
Gross margin	33.6		%	⁽¹⁾	47.1		%	28.7		%	35.8		%	⁽¹⁾
Research and development	1,594				1,237			496			3,327
Segment profit	$	639			$	1,170		$	1,231		3,040
Operating expenses:
Sales and marketing											2,896
General and administrative											2,218
Intangible amortization											1,201
Restructuring											2,601
Long-lived assets impairment											—
Operating profit (loss)											(5,876		)
Other income, net											74
Income tax expense											(8		)
Net income (loss)											$	(5,810	)
⁽¹⁾ The three and six months ended September 30, 2016, includes E&O expense for ClearLink DAS inventory and pipeline inventory. See Note 2, Restructuring Charges.




	Six months ended September 30, 2017
(in thousands)	IBW				ISMS			CNS			Total
Revenue	$	14,875			$	8,860		$	10,071		$	33,806
Cost of revenue	8,211				4,515			7,038			19,764
Gross profit	6,664				4,345			3,033			14,042
Gross margin	44.8		%		49.0		%	30.1		%	41.5		%
Research and development	2,906				1,088			487			4,481
Segment profit	$	3,758			$	3,257		$	2,546		9,561
Operating expenses:
Sales and marketing											4,328
General and administrative											3,520
Intangible amortization											2,095
Restructuring											165
Long-lived assets impairment											—
Operating profit (loss)											(547		)
Other income, net											720
Income tax expense											(25		)
Net income (loss)											$	148


	Six months ended September 30, 2016
(in thousands)	IBW				ISMS			CNS			Total
Revenue	$	12,765			$	9,248		$	10,583		$	32,596
Cost of revenue	9,538			⁽¹⁾	4,822			7,304			21,664			⁽¹⁾
Gross profit	3,227			⁽¹⁾	4,426			3,279			10,932			⁽¹⁾
Gross margin	25.3		%	⁽¹⁾	47.9		%	31.0		%	33.5		%	⁽¹⁾
Research and development	3,958				2,531			1,115			7,604
Segment profit (loss)	$	(731	)		$	1,895		$	2,164		3,328
Operating expenses:
Sales and marketing											6,277
General and administrative											4,563
Intangible amortization											2,401
Restructuring											2,565
Long-lived assets impairment											1,181
Operating profit (loss)											(13,659		)
Other income, net											91
Income tax expense											(10		)
Net income (loss)											$	(13,578	)

⁽¹⁾ The three and six months ended September 30, 2016, includes E&O expense for ClearLink DAS inventory and pipeline inventory.

See Note 2, Restructuring Charges.

Segment asset information is not reported to or used by the CODM.

^[1]

[1]	The three and six months ended September 30, 2016, includes $0.2 million and $1.6 million of E&O expense for ClearLink DAS inventory and pipeline inventory.