Market Overview

Westell Reports Fiscal 2020 Second Quarter Results

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AURORA, Ill., Nov. 13, 2019 (GLOBE NEWSWIRE) -- Westell Technologies, Inc. (NASDAQ:WSTL), a leading provider of high-performance network infrastructure solutions, today announced results for its fiscal 2020 second quarter ended September 30, 2019 (2Q20).  Management will host a conference call to discuss financial and business results tomorrow, Thursday, November 14, 2019, at 9:30 AM Eastern Time.

Revenue was $7.6 million, compared with $9.0 million in the prior quarter.  Net loss in 2Q20 was $3.6 million, compared with a net loss of $2.2 million in the prior quarter.  The losses include significant charges for excess and obsolete inventory of $1.3 million in 2Q20, compared to $0.6 million in 1Q20.  Inventory charges increased as a result of technology shifts and changing customer plans which lowered the sales outlook for certain legacy products.

"Second-quarter revenue and net loss continued our recent downward trend," said Tim Duitsman, Westell's newly appointed President and CEO. "In efforts to reverse that trend, we narrowed our product development to the most promising new products, with a keen focus on public safety, fiber connectivity solutions and remote monitoring.  These areas play to Westell's strengths and we believe offer the fastest paths to revenue growth.  On the cost side, we executed a substantial restructuring in October that resulted in charges of approximately $0.2 million and reduced company expenses by at least $1.7 million a year.  Going forward, we also do not expect inventory charges, which depressed our gross margins, to continue at the recent levels."

Consolidated Results 2Q20
3 months ended
9/30/19
1Q20
3 months ended
6/30/19
+ increase /
- decrease
Revenue $7.6M $9.0M -$1.4M
Gross Margin 20.9%
36.1%
-15.2%
Operating Expenses $5.3M $5.6M -$0.3M
Net Income (Loss) ($3.6M) ($2.2M) -$1.4M
Earnings (Loss) Per Share ($0.23)
($0.14)
-$0.09
Non-GAAP Operating Expenses (1) $4.8M $5.0M -$0.2M
Non-GAAP Net Income (Loss) (1) ($3.1M) ($1.6M) -$1.5M
Non-GAAP Earnings (Loss) Per Share (1) ($0.20)
($0.10)
-$0.10
Ending Cash $21.7M $24.1M -$2.4M
(1)  Please refer to the schedule at the end of this press release for a complete GAAP to non-GAAP reconciliation and other information related to non-GAAP financial measures.

In-Building Wireless (IBW) Segment

IBW's revenue decrease was driven by lower sales in commercial repeaters, RF system components, and passive DAS conditioners offset in part by an increase in public safety revenue.  IBW's gross margin decrease primarily reflects the impact of the lower sales against fixed costs.  It also includes an excess and obsolete inventory charge of $0.5 million, compared to $0.4 million in the prior quarter.

($ in thousands) 2Q20
3 months ended
9/30/19
1Q20
3 months ended
6/30/19
+ increase /
- decrease
IBW Segment Revenue $2,618
$2,923
-$305
IBW Segment Gross Margin 15.8% 33.3% -17.5%
IBW Segment R&D Expense $403
$399
$4
IBW Segment Profit $10
$573
-$563

Intelligent Site Management (ISM) Segment

ISM's revenue decrease was due to lower sales of remote units, primarily due to a decrease in orders for one large domestic service provider customer.  ISM's gross margin decrease was primarily driven by an excess and obsolete inventory charge of $0.4 million, compared to $0.1 million in the prior quarter.

($ in thousands) 2Q20
3 months ended
9/30/19
1Q20
3 months ended
6/30/19
+ increase /
- decrease
ISM Segment Revenue $2,646 $3,095 -$449
ISM Segment Gross Margin 39.4% 51.0% -11.6%
ISM Segment R&D Expense $619 $701 -$82
ISM Segment Profit $423 $878 -$455

Communication Network Solutions (CNS) Segment

CNS's revenue decrease was due to lower sales across nearly all product lines.  CNS's gross margin decrease was due to an increased excess and obsolete inventory charge, which was $0.4 million compared to $0.1 million in the prior quarter, mix changes and cost-absorption effects of lower revenue.

($ in thousands) 2Q20
3 months ended
9/30/19
1Q20
3 months ended
6/30/19
+ increase /
- decrease
CNS Segment Revenue $2,305 $2,984 -$679
CNS Segment Gross Margin 5.4% 23.3% -17.9%
CNS Segment R&D Expense $427 $456 -$29
CNS Segment Profit (Loss) $(303) $239 -$542

Conference Call Information
Management will discuss financial and business results during the quarterly conference call on Thursday, November 14, 2019, 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 14, 2019, by calling (888) 206-4065 and providing the operator confirmation number 49124964.

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://ir.westell.com.  A digital recording of the entire conference will be available for replay on Westell's website by approximately 12:00 PM Eastern Time following the conclusion of the conference.

About Westell Technologies
Westell is a leading provider of high-performance network 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 https://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, 2019, 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)

    Three months ended   Six months ended
    September 30,   June 30   September 30,   September 30,   September 30,
    2019   2019   2018   2019   2018
Revenue   $ 7,569    
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