Westell Delivers Profitability and Revenue Growth for Fiscal 2Q18

Sequential revenue growth and strong gross margin drive positive operating profit and net income

AURORA, Ill., Nov. 01, 2017 (GLOBE NEWSWIRE) -- Westell Technologies, Inc. (NASDAQ:WSTL), a leading provider of high-performance wireless infrastructure solutions, announced results for its fiscal 2018 second quarter ended September 30, 2017 (2Q18).  Management will host a conference call to discuss financial and business results tomorrow, Thursday, November 2, 2017, at 9:30 AM Eastern Time (details below).

Revenue was $17.2 million, the third consecutive quarter of sequential growth, and comprised $7.9 million from the In-Building Wireless (IBW) segment, $4.7 million from the Intelligent Site Management and Services (ISMS) segment, and $4.6 million from the Communication Network Solutions (CNS) segment.

Westell’s President and Chief Executive Officer Matthew B. Brady stated, “Positive GAAP earnings and a greater than twofold sequential improvement of non-GAAP earnings were driven by revenue growth, a healthy gross margin, and continued expense management.  Revenue highlights included the best IBW results since the December 2015 quarter, sequential ISMS growth, and solid CNS performance.”

“In fiscal 2Q18, IBW achieved record revenue levels for the Universal DAS Interface Tray (UDIT) product line, as well as for our passive system components, which we sell for both commercial and public safety deployments,” Brady added.  “Moving forward, we are focused on gaining further traction in the IBW public safety market, the evolving Centralized Radio Access Network (CRAN) architecture for our ISMS and CNS solutions, and new opportunities that can deliver consistent and profitable revenue growth.”

Cash and short-term investments were $24.2 million at September 30, 2017, compared to $23.7 million at June 30, 2017.  Efficiencies in inventory management contributed to the $0.7 million of positive operating cash flow.  This was partly offset by $0.2 million of cash used for share repurchases and capital expenditures.

In-Building Wireless (IBW) Segment

IBW’s sequential revenue increase was driven by record quarterly sales of UDIT and passive system components.  IBW’s segment gross margin increase was driven primarily by the increased revenue and an improved cost structure.

Intelligent Site Management & Services (ISMS) Segment

ISMS’s sequential revenue increase was driven primarily by increased sales of Remote units.  ISMS’s segment gross margin decrease was primarily due to a less favorable mix.

Communication Network Solutions (CNS) Segment

CNS’s sequential revenue decrease was primarily driven by lower sales of Integrated Cabinets.  CNS’s gross margin increase was primarily due to a more favorable mix.

Conference Call Information
Management will discuss financial and business results during the quarterly conference call on Thursday, November 2, 2017, 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.  A participant may also register by telephone on November 2, 2017, by calling 888-206-4073 no later than 8:15 AM Central Time (9:15 AM Eastern Time) and providing the operator confirmation number 45830387.

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: https://ir.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 following the conclusion of the conference.

About Westell Technologies
Westell is a leading provider of high-performance wireless 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), 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, 2017, 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. 2Q18 restructuring expense related to severance costs for terminated employees.
2. The Company recorded restructuring expense primarily relating to abandonment of excess office space at its headquarters and in New Hampshire, and severance costs for terminated employees.
3. 1Q17 non-cash impairment related to long-lived assets associated with the discontinuation of ClearLink DAS.
4. 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 a cumulative translation adjustment.
5. All common stock, equity, share and per share amounts have been retroactively adjusted to reflect a one-for-four reverse stock split which was effective June 7, 2017.

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

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

⁽¹⁾ 1Q17 non-cash impairment related to long-lived assets associated with the discontinuation of ClearLink DAS.
⁽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 a cumulative translation adjustment.
⁽³⁾ As of September 30, 2017, the Company has $5.0 million 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

Reconciliation of GAAP to non-GAAP IBW Segment Gross Margin

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⁾                On April 1, 2013, the Company purchased Kentrox.  The acquisition required the step-down on acquired deferred revenue, which resulted in lower revenue that will not recur once those liabilities have fully settled.  The adjustment removes the step-down on acquired deferred revenue that was recognized.
⁽²⁾                Non-recurring excess and obsolete inventory charges on inventory and firm purchase commitments associated with the previously announced strategic decision related to the discontinuation of ClearLink DAS.
⁽³⁾                Stock-based compensation is a non-cash expense incurred in accordance with share-based compensation accounting standards.

⁽⁴⁾                Non-cash impairment related to tangible long-lived assets associated with the previously announced strategic decision related to the discontinuation of ClearLink DAS.
⁽⁵⁾                Amortization of intangibles is a non-cash expense arising from previously acquired intangible assets.

⁽⁶⁾                Restructuring expenses are not directly related to the ongoing performance of our fundamental business operations, including costs relating to abandonment of excess office space at our headquarters and in New Hampshire, and severance costs for terminated employees. This adjustment also includes severance benefits related to the departure of certain former executives.
⁽⁷⁾                EBITDA is a non-GAAP measure that represents Earnings Before Interest, Taxes, Depreciation, and Amortization.  The Company presents Adjusted EBITDA.
⁽⁸⁾                Non-recurring foreign currency translation gain related to the wind-up of the NoranTel legal entity during the quarter ended September 30, 2017.

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Released November 1, 2017