Richard Gilbert Chief Executive Officer Westell Technologies, Inc. 630.375.4128 InvestorRelations@westell.com |
• | Fourth quarter revenue for the Westell Division of $10.7 million represented the strongest quarter since March 2012 |
• | Revenue from custom systems integration services reached record levels, and the outlook for new products continues to improve |
• | Cash and short-term investments were $115.1 million at March 31, 2013 |
• | The Kentrox acquisition was successfully completed on April 1, 2013 |
Three Months Ended March 31, | Twelve Months Ended March 31, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Revenue | $ | 10,664 | $ | 11,334 | $ | 40,044 | $ | 69,655 | |||||||||
Gross profit | 3,937 | 4,407 | 14,324 | 23,257 | |||||||||||||
Gross margin | 36.9 | % | 38.9 | % | 35.8 | % | 33.4 | % | |||||||||
Operating expenses: | |||||||||||||||||
Sales & marketing | 1,924 | 1,388 | 7,439 | 6,496 | |||||||||||||
Research & development | 1,811 | 1,862 | 7,326 | 7,727 | |||||||||||||
General & administrative | 2,542 | 1,990 | 9,910 | 7,615 | |||||||||||||
Intangibles amortization | 236 | 135 | 892 | 548 | |||||||||||||
Restructuring | — | 275 | 149 | 550 | |||||||||||||
Goodwill impairment (1) | 2,884 | — | 2,884 | — | |||||||||||||
Total operating expenses | 9,397 | 5,650 | 28,600 | 22,936 | |||||||||||||
Operating income (loss) | (5,460 | ) | (1,243 | ) | (14,276 | ) | 321 | ||||||||||
Gain on CNS asset sale (2) | — | — | — | 31,654 | |||||||||||||
Other income (expense), net | 41 | 130 | 175 | 331 | |||||||||||||
Income (loss) before income taxes and discontinued operations | (5,419 | ) | (1,113 | ) | (14,101 | ) | 32,306 | ||||||||||
Income taxes (3) | (32,823 | ) | (1,725 | ) | (29,392 | ) | (12,875 | ) | |||||||||
Net income (loss) from continuing operations | (38,242 | ) | (2,838 | ) | (43,493 | ) | 19,431 | ||||||||||
Income (loss) from discontinued operations, net of income tax (4) | 84 | 390 | (545 | ) | 22,551 | ||||||||||||
Net income (loss) | $ | (38,158 | ) | $ | (2,448 | ) | $ | (44,038 | ) | $ | 41,982 | ||||||
Basic net income (loss) per share: | |||||||||||||||||
Basic net income (loss) from continuing operations | $ | (0.66 | ) | $ | (0.04 | ) | $ | (0.73 | ) | $ | 0.29 | ||||||
Basic net income (loss) from discontinued operations | — | 0.01 | (0.01 | ) | 0.34 | ||||||||||||
Net income (loss) * | $ | (0.66 | ) | $ | (0.04 | ) | $ | (0.73 | ) | $ | 0.63 | ||||||
Diluted net income (loss) per share: | |||||||||||||||||
Diluted net income (loss) from continuing operations | $ | (0.66 | ) | $ | (0.04 | ) | $ | (0.73 | ) | $ | 0.29 | ||||||
Diluted net income (loss) from discontinued operations | — | 0.01 | (0.01 | ) | 0.33 | ||||||||||||
Net income (loss) * | $ | (0.66 | ) | $ | (0.04 | ) | $ | (0.73 | ) | $ | 0.62 | ||||||
Weighted-average number of shares outstanding: | |||||||||||||||||
Basic | 58,154 | 64,397 | 59,944 | 66,657 | |||||||||||||
Diluted | 58,154 | 64,397 | 59,944 | 67,979 |
(1) | The Company recorded a non-cash charge of $2.9 million during the fourth quarter of fiscal 2013 to record the impairment of the full carrying value of the Company's goodwill. Based on financial market considerations, a history of recent losses and other factors, the Company's goodwill did not pass a two-step goodwill impairment valuation test, resulting in the impairment charge. |
(2) | The Company sold certain assets and transferred certain liabilities of the CNS segment to NETGEAR, Inc. on April 15, 2011. |
(3) | In fiscal year 2013, the Company considered both the positive and negative evidence available to assess its ability to realize the value of its deferred tax assets. The Company considered negative factors, which include recent losses and a forecasted cumulative loss position, as well as positive evidence consisting primarily of projected future earnings. The Company concluded that the negative evidence outweighed the objectively verifiable positive evidence. As a consequence, the Company increased the valuation allowance reserve and tax expense by $34.0 million. This reserve, taken together with the tax contingency reserve, has the effect of reserving in full all of the Company's deferred tax assets as of March 31, 2013. |
(4) | The Company sold ConferencePlus on December 31, 2011. The 12 months ended March 31, 2012, included a $20.5 million after-tax gain. In the 12 months ended March 31, 2013, the Company recorded an after-tax charge of $0.8 million for an indemnification claim related to the ConferencePlus sale transaction and an unrelated tax benefit of $0.3 million that resulted from finalizing income tax filings related to the sale. |
March 31, 2013 | March 31, 2012 | |||||||||
Assets: | ||||||||||
Cash and cash equivalents | $ | 88,233 | $ | 120,832 | ||||||
Restricted cash | 2,500 | 7,451 | ||||||||
Short-term investments | 24,349 | 14,455 | ||||||||
Accounts receivable, net | 6,689 | 5,710 | ||||||||
Inventories | 12,223 | 9,906 | ||||||||
Prepaid expenses and other current assets | 1,804 | 1,456 | ||||||||
Deferred income tax asset | — | 1,859 | ||||||||
Total current assets | 135,798 | 161,669 | ||||||||
Property and equipment, net | 1,081 | 1,197 | ||||||||
Goodwill | — | 801 | ||||||||
Intangibles, net | 5,063 | 2,728 | ||||||||
Deferred income tax asset | 2,735 | 30,740 | ||||||||
Other assets | 495 | 291 | ||||||||
Total assets | $ | 145,172 | $ | 197,426 | ||||||
Liabilities and Stockholders’ Equity: | ||||||||||
Accounts payable | $ | 4,126 | $ | 3,142 | ||||||
Accrued expenses | 3,953 | 3,328 | ||||||||
Total current liabilities | 8,079 | 6,470 | ||||||||
Tax contingency reserve long-term | 2,768 | 3,483 | ||||||||
Contingent consideration long-term | 2,333 | — | ||||||||
Other long-term liabilities | 915 | 1,109 | ||||||||
Total liabilities | 14,095 | 11,062 | ||||||||
Total stockholders’ equity | 131,077 | 186,364 | ||||||||
Total liabilities and stockholders’ equity | $ | 145,172 | $ | 197,426 |
Twelve Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | (44,038 | ) | $ | 41,982 | |||
Reconciliation of net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 1,381 | 2,053 | ||||||
Goodwill impairment | 2,884 | — | ||||||
Stock-based compensation | 1,407 | 1,205 | ||||||
Gain on CNS asset sale | — | (31,654 | ) | |||||
Gain on sale of ConferencePlus, net of tax | — | (20,489 | ) | |||||
Restructuring | 149 | 1,217 | ||||||
Deferred taxes | 29,865 | 12,438 | ||||||
Other | (8 | ) | (290 | ) | ||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (979 | ) | 12,396 | |||||
Inventory | (2,002 | ) | 1,852 | |||||
Accounts payable and accrued liabilities | (183 | ) | (26,739 | ) | ||||
Other | (601 | ) | 1,073 | |||||
Net cash provided by (used in) operating activities | (12,125 | ) | (4,956 | ) | ||||
Cash flows from investing activities: | ||||||||
Net purchases of short-term investments and debt securities | (9,894 | ) | (13,965 | ) | ||||
Proceeds from CNS asset sale | — | 36,729 | ||||||
Proceeds from the sale of ConferencePlus, net of cash transferred | — | 40,331 | ||||||
Payment for business acquisition | (2,524 | ) | — | |||||
Purchases of property and equipment, net | (379 | ) | (819 | ) | ||||
Proceeds from sale of assets | 15 | 325 | ||||||
Changes in restricted cash | 4,951 | (7,451 | ) | |||||
Net cash provided by (used in) investing activities | (7,831 | ) | 55,150 | |||||
Cash flows from financing activities: | ||||||||
Purchase of treasury stock | (12,733 | ) | (17,385 | ) | ||||
Excess tax benefits from stock-based compensation | — | 145 | ||||||
Proceeds from stock options exercised | 87 | 1,684 | ||||||
Repurchase of subsidiary stock options | — | (117 | ) | |||||
Net cash provided by (used in) financing activities | (12,646 | ) | (15,673 | ) | ||||
Effect of exchange rate changes on cash | 3 | (97 | ) | |||||
Net increase (decrease) in cash | (32,599 | ) | 34,424 | |||||
Cash and cash equivalents, beginning of period | 120,832 | 86,408 | ||||||
Cash and cash equivalents, end of period | $ | 88,233 | $ | 120,832 |
Three Months Ended March 31, 2013 | ||||||||||||||||
Westell | CNS | Unallocated | Total | |||||||||||||
Revenue | $ | 10,663 | $ | 1 | $ | — | $ | 10,664 | ||||||||
Gross profit | 4,013 | (76 | ) | — | 3,937 | |||||||||||
Gross margin | 37.6 | % | nm | 36.9 | % | |||||||||||
Operating expenses: | ||||||||||||||||
Sales & marketing | 1,924 | — | — | 1,924 | ||||||||||||
Research & development | 1,509 | 302 | — | 1,811 | ||||||||||||
General & administrative | 1,169 | 69 | 1,304 | 2,542 | ||||||||||||
Intangibles amortization | 235 | 1 | — | 236 | ||||||||||||
Restructuring | — | — | — | — | ||||||||||||
Goodwill impairment | 2,884 | — | — | 2,884 | ||||||||||||
Total operating expenses (1) | 7,721 | 372 | 1,304 | 9,397 | ||||||||||||
Operating income (loss) | $ | (3,708 | ) | $ | (448 | ) | (1,304 | ) | (5,460 | ) | ||||||
Other income | 41 | 41 | ||||||||||||||
Income (loss) before income taxes before discontinued operations | (1,263 | ) | (5,419 | ) | ||||||||||||
Income taxes | (32,823 | ) | (32,823 | ) | ||||||||||||
Net income (loss) from continuing operations | $ | (34,086 | ) | $ | (38,242 | ) |
Three Months Ended March 31, 2012 | ||||||||||||||||
Westell | CNS | Unallocated | Total | |||||||||||||
Revenue | $ | 10,709 | $ | 625 | $ | — | $ | 11,334 | ||||||||
Gross profit | 4,182 | 225 | — | 4,407 | ||||||||||||
Gross margin | 39.1 | % | 36.0 | % | 38.9 | % | ||||||||||
Operating expenses: | ||||||||||||||||
Sales & marketing | 1,376 | 12 | — | 1,388 | ||||||||||||
Research & development | 1,288 | 574 | — | 1,862 | ||||||||||||
General & administrative | 763 | 225 | 1,002 | 1,990 | ||||||||||||
Intangibles amortization | 134 | 1 | — | 135 | ||||||||||||
Restructuring | 275 | — | — | 275 | ||||||||||||
Total operating expenses (2) | 3,836 | 812 | 1,002 | 5,650 | ||||||||||||
Operating income (loss) | $ | 346 | $ | (587 | ) | (1,002 | ) | (1,243 | ) | |||||||
Gain on CNS asset sale | — | — | ||||||||||||||
Other income | 130 | 130 | ||||||||||||||
Income (loss) before income taxes before discontinued operations | (872 | ) | (1,113 | ) | ||||||||||||
Income taxes | (1,725 | ) | (1,725 | ) | ||||||||||||
Net income (loss) from continuing operations | $ | (2,597 | ) | $ | (2,838 | ) |
(1) | Includes $0.4 million and $0.0 million of depreciation and amortization expense from the Westell and CNS segments, respectively. |
(2) | Includes $0.3 million and $0.0 million of depreciation and amortization expense from the Westell and CNS segments, respectively. |
Twelve Months Ended March 31, 2013 | ||||||||||||||||
Westell | CNS | Unallocated | Total | |||||||||||||
Revenue | $ | 38,808 | $ | 1,236 | $ | — | $ | 40,044 | ||||||||
Gross profit | 13,325 | 999 | — | 14,324 | ||||||||||||
Gross margin | 34.3 | % | 80.8 | % | 35.8 | % | ||||||||||
Operating expenses: | ||||||||||||||||
Sales & marketing | 7,492 | (53 | ) | — | 7,439 | |||||||||||
Research & development | 5,725 | 1,601 | — | 7,326 | ||||||||||||
General & administrative | 4,401 | 600 | 4,909 | 9,910 | ||||||||||||
Intangibles amortization | 887 | 5 | — | 892 | ||||||||||||
Restructuring | 149 | — | — | 149 | ||||||||||||
Goodwill impairment | 2,884 | — | — | 2,884 | ||||||||||||
Total operating expenses (1) | 21,538 | 2,153 | 4,909 | 28,600 | ||||||||||||
Operating income (loss) | $ | (8,213 | ) | $ | (1,154 | ) | (4,909 | ) | (14,276 | ) | ||||||
Other income | 175 | 175 | ||||||||||||||
Income (loss) before income taxes before discontinued operations | (4,734 | ) | (14,101 | ) | ||||||||||||
Income taxes | (29,392 | ) | (29,392 | ) | ||||||||||||
Net income (loss) from continuing operations | $ | (34,126 | ) | $ | (43,493 | ) |
Twelve Months Ended March 31, 2012 | ||||||||||||||||
Westell | CNS | Unallocated | Total | |||||||||||||
Revenue | $ | 43,629 | $ | 26,026 | $ | — | $ | 69,655 | ||||||||
Gross profit | 17,272 | 5,985 | — | 23,257 | ||||||||||||
Gross margin | 39.6 | % | 23.0 | % | 33.4 | % | ||||||||||
Operating expenses: | ||||||||||||||||
Sales & marketing | 5,573 | 923 | — | 6,496 | ||||||||||||
Research & development | 5,117 | 2,610 | — | 7,727 | ||||||||||||
General & administrative | 2,834 | 976 | 3,805 | 7,615 | ||||||||||||
Intangibles amortization | 544 | 4 | — | 548 | ||||||||||||
Restructuring | 275 | 275 | — | 550 | ||||||||||||
Total operating expenses (2) | 14,343 | 4,788 | 3,805 | 22,936 | ||||||||||||
Operating income (loss) | $ | 2,929 | $ | 1,197 | (3,805 | ) | 321 | |||||||||
Gain on CNS asset sale | 31,654 | 31,654 | ||||||||||||||
Other income | 331 | 331 | ||||||||||||||
Income (loss) before income taxes before discontinued operations | 28,180 | 32,306 | ||||||||||||||
Income taxes | (12,875 | ) | (12,875 | ) | ||||||||||||
Net income (loss) from continuing operations | $ | 15,305 | $ | 19,431 |
(1) | Includes $1.4 million and $0.0 million of depreciation and amortization expense from the Westell and CNS segments, respectively. |
(2) | Includes $1.0 million and $0.1 million of depreciation and amortization expense from the Westell and CNS segments, respectively. |
Three Months Ended March 31, | Twelve Months Ended March 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
GAAP net income (loss) | $ | (38,158 | ) | $ | (2,448 | ) | $ | (44,038 | ) | $ | 41,982 | |||||
Adjustments: | ||||||||||||||||
CNS asset sale, net of tax (1) | — | 201 | 316 | (18,763 | ) | |||||||||||
Restructuring related to Noran Tel, net of tax | — | 168 | 91 | 168 | ||||||||||||
Income taxes (2) | 34,032 | 1,726 | 34,032 | 1,726 | ||||||||||||
Goodwill impairment (3) | 2,884 | — | 2,884 | — | ||||||||||||
(Income) loss from discontinued operations, net of income tax (4) | (84 | ) | (390 | ) | 545 | (22,551 | ) | |||||||||
Total adjustments | 36,832 | 1,705 | 37,868 | (39,420 | ) | |||||||||||
Non-GAAP net income (loss) | $ | (1,326 | ) | $ | (743 | ) | $ | (6,170 | ) | $ | 2,562 | |||||
GAAP net income (loss) per common share: | ||||||||||||||||
Basic | $ | (0.66 | ) | $ | (0.04 | ) | $ | (0.73 | ) | $ | 0.63 | |||||
Diluted | $ | (0.66 | ) | $ | (0.04 | ) | $ | (0.73 | ) | $ | 0.62 | |||||
Non-GAAP net income (loss) per common share: | ||||||||||||||||
Basic | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.10 | ) | $ | 0.04 | |||||
Diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.10 | ) | $ | 0.04 | |||||
Average number of common shares outstanding: | ||||||||||||||||
Basic | 58,154 | 64,397 | 59,944 | 66,657 | ||||||||||||
Diluted | 58,154 | 64,397 | 59,944 | 67,979 |
(1) | On April 15, 2011, the Company sold certain assets and transferred certain liabilities of the CNS segment. The adjustments remove the gain on the sale, costs associated with the transaction, and related income tax effects. Fiscal year 2013 amounts reflect the costs to resolve a dispute related to the CNS sale. |
(2) | Adjustment removes tax effects of changes in valuation allowance reserves. |
(3) | The Company recorded a non-cash charge of $2.9 million during the fourth quarter of fiscal 2013 to record the impairment of the full carrying value of the Company's goodwill. |
(4) | On December 31, 2011, the ConferencePlus Division was sold. In the 12 months ended March 31, 2013, the Company recorded an after-tax charge of $0.8 million for an indemnification claim related to the ConferencePlus sale transaction, and an unrelated tax benefit of $0.3 million that resulted from finalizing income tax filings related to the sale. Historical results of operations of ConferencePlus are presented as discontinued operations. |