Westell Delivers $2.9 Million Positive Cash Flow for Fiscal 3Q17

AURORA, Ill., Feb. 08, 2017 (GLOBE NEWSWIRE) -- Westell Technologies, Inc. (NASDAQ:WSTL), a leading provider of high-performance wireless infrastructure solutions, today announced results for its fiscal 2017 third quarter ended December 31, 2016 (3Q17).  Management will host a conference call to discuss financial and business results tomorrow, Thursday, February 9, 2017, at 9:30 AM Eastern Time (details below).

GAAP operating expenses were $7.8 million in 3Q17, a 36% reduction compared to $12.2 million in 2Q17.  Non-GAAP operating expenses, which exclude stock-based compensation, amortization of acquired intangible assets, and restructuring and restructuring-related charges, were $5.9 million in 3Q17, a 24% reduction compared to $7.8 million in 2Q17.

 “We substantially exceeded our goal for positive cash flow and lower operating expenses, and generated a healthy gross margin greater than our 40% target,” said Kirk Brannock, President and CEO of Westell Technologies.  “In the process, we have largely reset the Company’s expense structure that is designed to significantly improve profitability.  As a result, in 3Q17, bottom line performance improved by $4.0 million, or 69% sequentially, and we achieved positive non-GAAP profitability for the first time since 3Q14.” 

Consolidated revenue in 3Q17 was $15.0 million, and comprised $6.2 million from the In-Building Wireless (IBW) segment, $5.5 million from the Intelligent Site Management and Services (ISMS) segment, and $3.2 million from the Communication Network Solutions (CNS) segment.

“On the revenue side, despite a seasonally low CNS quarter, ISMS increased sequentially and had its best quarter since 3Q16.  In addition, IBW was strong again in 3Q17, including robust quarterly sales of our UDIT (Universal DAS Interface Tray) and continued favorable momentum for our half-watt public safety repeater.  In 3Q17, we also announced our new two-watt public safety repeater, which is expected to be available for customers in fiscal 4Q17,” Brannock said.

Cash grew 14% to $23.8 million at December 31, 2016, compared to $20.9 million at September 30, 2016, driven by the profitable non-GAAP results and improved working capital.

In-Building Wireless (IBW) Segment

IBW’s sequential revenue decrease was due primarily to lower sales of commercial repeaters.  IBW’s segment gross margin increase was driven primarily by lower costs and a more favorable mix.

Intelligent Site Management & Services (ISMS) Segment

ISMS’s sequential revenue increase was driven primarily by higher deployment services revenue.  ISMS’s segment gross margin increase was driven primarily by a more favorable mix.

Communication Network Solutions Group (CNS) Segment

CNS’s product lines are used primarily in the outside communication networks; as a result, the December quarter tends to be CNS’s lowest revenue quarter.  In 3Q17, CNS’s sequential revenue decrease was most affected by sequential drops in sales of Integrated Cabinets and Tower Mounted Amplifiers.  CNS’s gross margin decrease was due primarily to the lower revenue.

Conference Call Information
Management will discuss financial and business results during the quarterly conference call on Thursday, February 9, 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 February 9, 2017, by calling 888-206-4065 no later than 8:15 AM Central Time (9:15 AM Eastern Time) and providing the operator confirmation number 44112765.

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/about-us/investor-relations.  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 comprehensive set 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, 2016, 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:

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⁾ This adjustment is a non-recurring charge related to the release of contingent liabilities related to the sale of ConferencePlus which is presented as discontinued operations.