Westell Technologies Fiscal 2011 Second Quarter Highlights:
- Fiscal second quarter net income increased 65%, to $4.8 million, compared with $2.9 million in the same quarter of the prior year.
- Earnings per share were $0.07 per share for the quarter, compared with $0.04 per share in the same quarter of the prior year.
- Fiscal second quarter revenue of $51.1 million was up 8% compared with the same quarter of the prior year.
- Outside Plant Systems division operating profit for the quarter rose 45% on a 24% increase in revenue, compared with the prior year.
- The Customer Networking Solutions division generated positive operating income.
- Cash and cash equivalents increased by $8.3 million during the quarter, to $70.1 million.
Westell Technologies, Inc. (NASDAQ: WSTL), a leading provider of broadband products, outside plant telecommunications equipment and conferencing services, today announced results for its fiscal 2011 second quarter ended September 30, 2010. Total revenue for the quarter was $51.1 million, up 8% from $47.4 million in the fiscal second quarter of the prior year. Net income during the quarter was $4.8 million, or $0.07 per diluted share, compared to net income of $2.9 million, or $0.04 per diluted share, in the same quarter of the prior year. This is an increase of $1.9 million, or 65%. Total cash and cash equivalents were $70.1 million at September 30, 2010, up $8.3 million during the quarter.
“We are very pleased to be reporting increases in revenues and earnings, along with very strong cash flow,” said Chairman and CEO Rick Gilbert. “This demonstrates excellent execution and progress across the entire company.”
Fiscal Second Quarter Division and Consolidated Results
The Customer Networking Solutions (CNS) division reported revenue of $24.6 million in the second quarter of fiscal 2011, up 2% compared to $24.0 million in the same quarter of the prior year. VersaLink gateway product revenue increased in the current quarter compared to the same quarter of the prior year, on broad and robust customer demand, while revenue from modems decreased. UltraLine Series3 revenues of $5.6 million in the quarter were approximately the same as in the prior-year quarter. There were no material software-project revenues during the fiscal second quarter of 2011. CNS gross profit decreased by $0.2 million, with gross margin decreasing to 16.3%, compared with 17.5% in the prior-year quarter. Operating expenses dropped by $0.6 million, compared with the prior-year quarter. This decrease occurred in spite of increased investment in the HomeCloud initiative. As a result, the CNS results improved to operating income of $0.2 million for the second quarter of fiscal 2011, compared with an operating loss of $0.2 million in the same quarter of the prior year.
Revenue in the Outside Plant Systems (OSP) division was $16.1 million in the quarter, up 24% compared to $13.0 million in the same quarter of the prior year. OSP revenue continues to benefit from strong demand for its products that service the market for backhaul of cellular traffic. Fiscal 2011 second quarter gross profit increased by $1.8 million, or 34%, as a result of increased sales. Gross margins were 45.5%, compared with 42.0% in the prior-year quarter. Operating expenses increased $0.5 million, reflecting both increased activity and OSP’s ongoing development of new Ethernet-based products for the cellular backhaul market. The resulting operating income for OSP was $4.3 million, up $1.3 million versus the same quarter of the prior year.
Conference Plus (CP) revenue was up slightly to $10.4 million in the quarter, compared to $10.3 million in the same quarter of the prior year. Gross profit increased by $0.2 million on better gross margins, and operating expenses were $0.1 million higher. Operating income of $1.1 million therefore improved by $0.1 million, versus the same quarter of the prior year.
On a consolidated basis, fiscal second quarter revenue of $51.1 million was up 8%, or $3.7 million, compared with $47.4 million in the same quarter of the prior year. Gross profit increased $1.9 million, and gross margins were 32.3%, compared with 30.8% in the same quarter of the prior year. Operating expenses were essentially unchanged at $11.5 million. The gross profit improvement therefore translated to a $1.9 million increase in consolidated net income, which was $4.8 million, compared with $2.9 million in the same quarter of the prior year.
“With Outside Plant leading the way, all three of our divisions produced increases in both revenues and operating profits this quarter, compared with the prior-year quarter,” said Chairman and CEO Rick Gilbert. “This is another outstanding quarter for Westell.”
Conference Call Information
Management will address financial and business results during Westell’s fiscal second quarter 2011 earnings conference call on Thursday, October 21, at 9:00 AM Eastern Time. Conference Plus, Inc. (ConferencePlus®), a Westell subsidiary, will manage Westell’s earnings conference call using its EventManager™ Service.
Participants can register for the Westell conference by going to the URL: http://www.conferenceplus.com/westell.
With EventManager, participants can quickly register online in advance of the conference through a customizable web page that can be used to gather multiple pieces of information from each participant, as specified by the event arranger. After registering, participants receive dial-in numbers, a passcode, and a personal identification number (PIN) that is used to uniquely identify their presence and automatically join them into the audio conference. If a participant experiences any technical difficulties after joining the conference call on October 21, he or she can press *0 for support.
If a participant does not wish to register, he or she can participate in the call on October 21, by dialing ConferencePlus at 1-888-206-4073 no later than 8:45 AM, Eastern Time and using confirmation number 28061243. International participants may dial 1-847-413-9014.
Westell’s press release on earnings and related information that may be discussed on the earnings conference will be posted on the Investor Relations’ section of Westell’s website, http://www.westell.com. An archive of the entire conference will be available on Westell’s website or via Digital Audio Replay following the conclusion of the conference until the fiscal third quarter results are released. The replay of the conference can be accessed by dialing 1-888-843-8996 or 1-630-652-3044 and entering 7702527#.
About Westell
Westell Technologies, Inc., headquartered in Aurora, Illinois, is a holding company for Westell, Inc. and Conference Plus, Inc. Westell, Inc. designs, distributes, markets and services a broad range of broadband customer-premises equipment, digital transmission, remote monitoring, power distribution and demarcation products used by telephone companies and other telecommunications service providers. Conference Plus, Inc. is a leading global provider of audio, web, video and IP conferencing services. Additional information can be obtained by visiting http://www.westell.com and http://www.conferenceplus.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, need for financing, a further economic weakness in the United States economy and telecommunications market, the impact of competitive products or technologies, competitive pricing pressures, 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 effect of Westell’s accounting policies, the need for additional capital, the effect of economic conditions and trade, legal, social and economic risks (such as import, licensing and trade restrictions), retention of key personnel and other risks more fully described in the Company’s SEC filings, including the Company’s Form 10-K for the fiscal year ended March 31, 2010 under the section entitled 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 September 30, | Six Months ended September 30, | |||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||||
| Revenue | $ | 51,068 | $ | 47,353 | $ | 92,326 | $ | 100,866 | ||||||||||
| Gross profit | 16,478 | 14,572 | 32,093 | 29,779 | ||||||||||||||
| Gross margin | 32.3 | % | 30.8 | % | 34.8 | % | 29.5 | % | ||||||||||
| Operating expenses: | ||||||||||||||||||
| Sales & marketing | 4,671 | 4,458 | 9,159 | 9,396 | ||||||||||||||
| Research & development | 3,464 | 3,390 | 7,002 | 7,077 | ||||||||||||||
| General & administrative | 3,249 | 3,580 | 6,598 | 7,352 | ||||||||||||||
| Restructuring | - | - | - | 609 | (1) | |||||||||||||
| Intangibles amortization | 163 | 160 | 326 | 317 | ||||||||||||||
| Total operating expenses | 11,547 | 11,588 | 23,085 | 24,751 | ||||||||||||||
| Operating income | 4,931 | 2,984 | 9,008 | 5,028 | ||||||||||||||
| Other income | (28 | ) | (20 | ) | 25 | 71 | ||||||||||||
| Interest (expense) | (2 | ) | (2 | ) | (3 | ) | (4 | ) | ||||||||||
| Income before taxes | 4,901 | 2,962 | 9,030 | 5,095 | ||||||||||||||
| Income taxes | (138 | ) | (75 | ) | 335 | (230 | ) | |||||||||||
| Net income | $ | 4,763 | $ | 2,887 | $ | 9,365 | $ | 4,865 | ||||||||||
| Net income per common share: | ||||||||||||||||||
| Basic | $ | 0.07 | $ | 0.04 | $ | 0.14 | $ | 0.07 | ||||||||||
| Diluted | $ | 0.07 | $ | 0.04 | $ | 0.14 | $ | 0.07 | ||||||||||
| Average number of common shares outstanding: | ||||||||||||||||||
| Basic | 67,202 | 68,374 | 67,285 | 68,365 | ||||||||||||||
| Diluted | 68,487 | 69,069 | 68,321 | 68,858 | ||||||||||||||
(1) The Company terminated approximately 50 employees primarily in the CNS and ConferencePlus segments as a cost reduction action in the first quarter of fiscal 2010. | ||||||||||||||||||
| Westell Technologies, Inc. | ||||||||||||
| Condensed Consolidated Balance Sheet | ||||||||||||
| (Dollars in thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| Sept. 30, | March 31, | |||||||||||
| 2010 | 2010 | |||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | $ | 70,075 | $ | 61,315 | ||||||||
| Accounts receivable, net | 24,789 | 17,683 | ||||||||||
| Inventories | 17,690 | 21,258 | ||||||||||
| Prepaids and other current assets | 3,899 | 4,276 | ||||||||||
| Total current assets | 116,453 | 104,532 | ||||||||||
| Property and equipment, net | 3,878 | 4,665 | ||||||||||
| Goodwill | 2,151 | 2,162 | ||||||||||
| Intangibles, net | 3,713 | 4,063 | ||||||||||
| Deferred income taxes and other assets | 6,137 | 6,412 | ||||||||||
| Total assets | $ | 132,332 | $ | 121,834 | ||||||||
| Liabilities and Stockholders' Equity: | ||||||||||||
| Accounts payable | $ | 17,359 | $ | 15,195 | ||||||||
| Accrued liabilities | 8,184 | 9,203 | ||||||||||
| Deferred revenue | 1,160 | 860 | ||||||||||
| Total current liabilities | 26,703 | 25,258 | ||||||||||
| Deferred revenue, long-term | 137 | 174 | ||||||||||
| Other long-term liabilities | 7,847 | 8,671 | ||||||||||
| Total liabilities | 34,687 | 34,103 | ||||||||||
| Total stockholders' equity | 97,645 | 87,731 | ||||||||||
| Total liabilities and stockholders' equity | $ | 132,332 | $ | 121,834 | ||||||||
| Westell Technologies, Inc. | |||||||||||
| Condensed Consolidated Statement of Cash Flows | |||||||||||
| (Dollars in thousands) | |||||||||||
| (Unaudited) | |||||||||||
| Six Months ended Sept. 30, | |||||||||||
| 2010 | 2009 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 9,365 | $ | 4,865 | |||||||
Reconciliation of net income to net cash provided by | |||||||||||
| Depreciation and amortization | 1,427 | 1,967 | |||||||||
| Stock-based compensation | 580 | 287 | |||||||||
| Restructuring | - | 609 | |||||||||
| Other, net | (8 | ) | (175 | ) | |||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | (7,100 | ) | 2,329 | ||||||||
| Inventory | 3,551 | 2,650 | |||||||||
| Accounts payable and accrued liabilities | 848 | (5,528 | ) | ||||||||
| Deferred revenue | 263 | (1,698 | ) | ||||||||
| Prepaid and other current assets | 376 | 2,515 | |||||||||
| Other | 48 | 650 | |||||||||
| Net cash provided by (used in) operating activities | 9,350 | 8,471 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | (359 | ) | (769 | ) | |||||||
| Net cash (used in) provided by investing activities | (359 | ) | (769 | ) | |||||||
| Cash flows from financing activities: | |||||||||||
| Borrowing (repayment) of debt and leases payable | - | (29 | ) | ||||||||
| Proceeds from stock options exercised | 314 | - | |||||||||
| Purchase of treasury stock | (555 | ) | - | ||||||||
| Net cash (used in) provided by financing activities | (241 | ) | (29 | ) | |||||||
| Effect of exchange rate changes on cash | 10 | 205 | |||||||||
| Net increase in cash | 8,760 | 7,878 | |||||||||
| Cash and cash equivalents, beginning of period | 61,315 | 46,058 | |||||||||
| Cash and cash equivalents, end of period | $ | 70,075 | $ | 53,936 | |||||||
| Westell Technologies, Inc. | ||||||||||||||||||||
| Segment Statement of Operations | ||||||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Three months ended September 30, 2010 | ||||||||||||||||||||
| CNS | OSP | CP | Unallocated | Total | ||||||||||||||||
| Revenue | $ | 24,598 | $ | 16,117 | $ | 10,353 | $ | - | $ | 51,068 | ||||||||||
| Gross profit | 4,009 | 7,326 | 5,143 | - | 16,478 | |||||||||||||||
| Gross margin | 16.3 | % | 45.5 | % | 49.7 | % | 32.3 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales & marketing | 1,267 | 1,509 | 1,895 | - | 4,671 | |||||||||||||||
| Research & development | 1,902 | 921 | 641 | - | 3,464 | |||||||||||||||
| General & administrative | 688 | 455 | 1,438 | 668 | 3,249 | |||||||||||||||
| Restructuring | - | - | - | - | - | |||||||||||||||
| Intangibles amortization | 1 | 134 | 28 | - | 163 | |||||||||||||||
| Operating expenses (1) | 3,858 | 3,019 | 4,002 | 668 | 11,547 | |||||||||||||||
| Operating income (loss) | 151 | 4,307 | 1,141 | (668 | ) | 4,931 | ||||||||||||||
| Other income | - | - | - | (28 | ) | (28 | ) | |||||||||||||
| Interest (expense) | - | - | - | (2 | ) | (2 | ) | |||||||||||||
| Income taxes | - | - | - | (138 | ) | (138 | ) | |||||||||||||
| Net income (loss) | $ | 151 | $ | 4,307 | $ | 1,141 | $ | (836 | ) | $ | 4,763 | |||||||||
| Three months ended September 30, 2009 | ||||||||||||||||||||
| CNS | OSP | CP | Unallocated | Total | ||||||||||||||||
| Revenue | $ | 24,002 | $ | 13,049 | $ | 10,302 | - | $ | 47,353 | |||||||||||
| Gross profit | 4,189 | 5,481 | 4,902 | - | 14,572 | |||||||||||||||
| Gross margin | 17.5 | % | 42.0 | % | 47.6 | % | 30.8 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales & marketing | 1,357 | 1,255 | 1,846 | - | 4,458 | |||||||||||||||
| Research & development | 2,238 | 598 | 554 | - | 3,390 | |||||||||||||||
| General & administrative | 842 | 533 | 1,453 | 752 | 3,580 | |||||||||||||||
| Restructuring | - | - | - | - | - | |||||||||||||||
| Intangibles amortization | - | 132 | 28 | - | 160 | |||||||||||||||
| Operating expenses (2) | 4,437 | 2,518 | 3,881 | 752 | 11,588 | |||||||||||||||
| Operating income (loss) | (248 | ) | 2,963 | 1,021 | (752 | ) | 2,984 | |||||||||||||
| Other income | - | - | - | (20 | ) | (20 | ) | |||||||||||||
| Interest (expense) | - | - | - | (2 | ) | (2 | ) | |||||||||||||
| Income taxes | - | - | - | (75 | ) | (75 | ) | |||||||||||||
| Net income (loss) | $ | (248 | ) | $ | 2,963 | $ | 1,021 | $ | (849 | ) | $ | 2,887 | ||||||||
(1) Includes $0.1 million, $0.2 million and $0.4 million of depreciation and amortization expense in the CNS, OSP and CP segments, respectively. | ||||||||||||||||||||
(2) Includes $0.3 million, $0.3 million and $0.4 million of depreciation and amortization expense in the CNS, OSP and CP segments, respectively. | ||||||||||||||||||||
| Westell Technologies, Inc. | ||||||||||||||||||||
| Segment Statement of Operations | ||||||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Six months ended September 30, 2010 | ||||||||||||||||||||
| CNS | OSP | CP | Unallocated | Total | ||||||||||||||||
| Revenue | $ | 39,620 | $ | 31,841 | $ | 20,865 | $ | - | $ | 92,326 | ||||||||||
| Gross profit | 7,599 | 14,237 | 10,257 | - | 32,093 | |||||||||||||||
| Gross margin | 19.2 | % | 44.7 | % | 49.2 | % | 34.8 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales & marketing | 2,579 | 2,950 | 3,630 | - | 9,159 | |||||||||||||||
| Research & development | 3,876 | 1,902 | 1,224 | - | 7,002 | |||||||||||||||
| General & administrative | 1,428 | 1,093 | 2,797 | 1,280 | 6,598 | |||||||||||||||
| Restructuring | - | - | - | - | - | |||||||||||||||
| Intangibles amortization | 2 | 268 | 56 | - | 326 | |||||||||||||||
| Operating expenses (1) | 7,885 | 6,213 | 7,707 | 1,280 | 23,085 | |||||||||||||||
| Operating income (loss) | (286 | ) | 8,024 | 2,550 | (1,280 | ) | 9,008 | |||||||||||||
| Other income | - | - | - | 25 | 25 | |||||||||||||||
| Interest (expense) | - | - | - | (3 | ) | (3 | ) | |||||||||||||
| Income taxes | - | - | - | 335 | 335 | |||||||||||||||
| Net income (loss) | $ | (286 | ) | $ | 8,024 | $ | 2,550 | $ | (923 | ) | $ | 9,365 | ||||||||
| Six months ended September 30, 2009 | ||||||||||||||||||||
| CNS | OSP | CP | Unallocated | Total | ||||||||||||||||
| Revenue | $ | 52,626 | $ | 26,825 | $ | 21,415 | - | $ | 100,866 | |||||||||||
| Gross profit | 7,953 | 11,475 | 10,351 | - | 29,779 | |||||||||||||||
| Gross margin | 15.1 | % | 42.8 | % | 48.3 | % | 29.5 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales & marketing | 2,909 | 2,531 | 3,956 | - | 9,396 | |||||||||||||||
| Research & development | 4,766 | 1,188 | 1,123 | - | 7,077 | |||||||||||||||
| General & administrative | 1,661 | 1,068 | 3,110 | 1,513 | 7,352 | |||||||||||||||
| Restructuring | 414 | 46 | 149 | - | 609 | |||||||||||||||
| Intangibles amortization | - | 261 | 56 | - | 317 | |||||||||||||||
| Operating expenses (2) | 9,750 | 5,094 | 8,394 | 1,513 | 24,751 | |||||||||||||||
| Operating income (loss) | (1,797 | ) | 6,381 | 1,957 | (1,513 | ) | 5,028 | |||||||||||||
| Other income | - | - | - | 71 | 71 | |||||||||||||||
| Interest (expense) | - | - | - | (4 | ) | (4 | ) | |||||||||||||
| Income taxes | - | - | - | (230 | ) | (230 | ) | |||||||||||||
| Net income (loss) | $ | (1,797 | ) | $ | 6,381 | $ | 1,957 | $ | (1,676 | ) | $ | 4,865 | ||||||||
(1) Includes $0.3 million , $0.4 million and $0.7 million of depreciation and amortization expense in the CNS, OSP and CP segments, respectively. | ||||||||||||||||||||
| (2) Includes $0.7 million, $0.5 million and $0.7 million of depreciation and amortization expense in the CNS, OSP and CP segments, respectively. | ||||||||||||||||||||
Contacts:
Investors / Trade / Media
Brian
Cooper
Chief Financial Officer
630.375.4740
BCooper@westell.com
