Quarterly report pursuant to Section 13 or 15(d)

Interim Segment Information (Notes)

Interim Segment Information (Notes)

9 Months Ended

Dec. 31, 2018

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, 2018 and as updated in this filing.

The Company’s three reportable segments are as follows:

In-Building Wireless (IBW) Segment

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, solutions include distributed antenna systems (DAS) conditioners and digital repeaters. For the public safety market, solutions include half-watt and two-watt repeaters and a battery backup unit. IBW also offers ancillary products that consist of passive system components and antennas for both the commercial and public safety markets.

Intelligent Site Management (ISM) Segment (formerly Intelligent Site Management and Services or ISMS)

ISM segment solutions include a suite of remote units, which are network devices used for on-site processing. Remotes provide on-site machine-to-machine (M2M) communications that enable operators to remotely monitor, manage, and control site infrastructure and support systems. Remotes can be and often are combined with our Optima management software system. ISM also offers support services (i.e., maintenance agreements) and deployment services (i.e., installation).

Communications Network Solutions (CNS) Segment

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

Segment information for the three and nine months ended December 31, 2018, and 2017, is set forth below:



	Three months ended December 31, 2018
(in thousands)	IBW			ISM			CNS			Total
Revenue	$	2,794		$	5,116		$	2,812		$	10,722
Cost of revenue	1,725			2,217			2,190			6,132
Gross profit	1,069			2,899			622			4,590
Gross margin	38.3		%	56.7		%	22.1		%	42.8		%
Research and development	682			570			484			1,736
Segment profit	$	387		$	2,329		$	138		2,854
Operating expenses:
Sales and marketing										1,999
General and administrative										1,738
Intangible amortization										830
Operating profit (loss)										(1,713		)
Other income, net										158
Income tax benefit (expense)										(1		)
Net income (loss) from continuing operations										$	(1,556	)

	Three months ended December 31, 2017
(in thousands)	IBW			ISM			CNS			Total
Revenue	$	5,223		$	5,802		$	2,650		$	13,675
Cost of revenue	2,754			2,642			2,203			7,599
Gross profit	2,469			3,160			447			6,076
Gross margin	47.3		%	54.5		%	16.9		%	44.4		%
Research and development	750			547			245			1,542
Segment profit	$	1,719		$	2,613		$	202		4,534
Operating expenses:
Sales and marketing										1,950
General and administrative										1,502
Intangible amortization										1,047
Restructuring										—
Operating profit (loss)										35
Other income, net										79
Income tax benefit (expense)										685			⁽¹⁾
Net income (loss) from continuing operations										$	799
⁽¹⁾ During the quarter ended December 31, 2017, the Company had income tax benefit from the release of the tax valuation allowance associated with previously generated alternative minimum tax (AMT) credits due to the enacted Tax Reform. See Note 9.




	Nine months ended December 31, 2018
(in thousands)	IBW			ISM			CNS			Total
Revenue	$	9,997		$	13,506		$	10,362		$	33,865
Cost of revenue	5,574			6,237			7,336			19,147
Gross profit	4,423			7,269			3,026			14,718
Gross margin	44.2		%	53.8		%	29.2		%	43.5		%
Research and development	2,071			1,697			1,243			5,011
Segment profit	$	2,352		$	5,572		$	1,783		9,707
Operating expenses:
Sales and marketing										6,012
General and administrative										4,672
Intangible amortization										2,652
Operating profit (loss)										(3,629		)
Other income, net										442
Income tax benefit (expense)										(11		)
Net income (loss) from continuing operations										$	(3,198	)

	Nine months ended December 31, 2017
(in thousands)	IBW			ISM			CNS			Total
Revenue	$	20,098		$	14,662		$	12,721		$	47,481
Cost of revenue	10,965			7,157			9,241			27,363
Gross profit	9,133			7,505			3,480			20,118
Gross margin	45.4		%	51.2		%	27.4		%	42.4		%
Research and development	3,656			1,635			732			6,023
Segment profit (loss)	$	5,477		$	5,870		$	2,748		14,095
Operating expenses:
Sales and marketing										6,278
General and administrative										5,022
Intangible amortization										3,142
Restructuring										165
Operating profit (loss)										(512		)
Other income, net										799			⁽¹⁾
Income tax benefit (expense)										660			⁽²⁾
Net income (loss) from continuing operations										$	947

⁽¹⁾ During the quarter ended September 30, 2017, the Company dissolved the NoranTel legal entity, which triggered a one-time foreign currency gain with the reversal of a cumulative translation adjustment. See Note 1.

⁽²⁾During the quarter ended December 31, 2017, the Company had income tax benefit from the release of the tax valuation allowance associated with previously generated alternative minimum tax (AMT) credits due to the enacted Tax Reform. See Note 9.

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