SwingTrade Member Forum

[Zephyr]

WSTL - Westell Technologies Reports 4th Quarter and Fiscal 2006 Results

May 11, 2006 16:01:01 (ET)

AURORA, Ill., May 11, 2006 (BUSINESS WIRE) -- Westell Technologies, Inc. (WSTL, Trade), a leading provider of broadband access solutions and conferencing services, today announced the results for its fourth quarter and fiscal year 2006, ending March 31, 2006.

Total revenues for the March 2006 quarter increased 7.2% to $73.1 million from $68.1 million in the December 2005 quarter. Breaking down revenues by product line for the March quarter compared to the December quarter showed Customer Networking Equipment revenue increased 1.0% to $49.1 million from $48.6 million; Conferencing Services revenue increased 10.6 % to $11.5 million from $10.4 million; Network Service Access equipment revenue increased 36.3 % to $12.4 million from $9.1 million, primarily due to the December 2005 acquisition of HyperEdge Corporation.

Compared to the fourth quarter of fiscal 2005, total revenues for the quarter decreased 6.6% to $73.1 million from $78.2 million. Customer Networking Equipment revenue decreased 15.0% to $49.1 million from $57.8 million. This decline is primarily due to the movement of customer promotional activity away from the Company's VersaLink(TM) gateway product to the ProLine(TM) modem product that carries a lower selling price. Conferencing Services revenue was flat at $11.5 million when compared to the comparable prior of the year quarter. Network Service Access revenue increased 38.1% to $12.4 million from $9.0 million primarily due to the December 2005 acquisition of HyperEdge.

Total revenues for fiscal year 2006 increased 5% to $283.2 million from $270.3 million for fiscal 2005. Customer Networking Equipment revenue increased 6% to $194.8 million from $183.4 million in fiscal 2005. Conferencing Service revenue increased 2% to $45.1 million from $44.4 million in the prior year. Revenue from the Network Services Access business increased 2% to $43.3 million from $42.5 million in fiscal 2005.

Westell reported net income for the fourth quarter of $2.5 million, or $0.04 per diluted share, which includes an income tax expense of $3.2 million. As part of this tax expense the Company recorded an additional valuation allowance in the amount of $785 thousand, primarily related to state net operating loss carryforwards that the Company no longer believes will be utilized. Net income for fiscal 2006 was $12.8 million, or $0.18 per diluted share, including an income tax expense of $10.1 million. During the fourth quarter of last year, the Company recorded net income of $28.4 million, or $0.40 per diluted share including a tax benefit of $20.1 million, resulting from the release of a deferred tax valuation allowance. For fiscal 2005, net income was $39.7 million or $0.56 per diluted share that included a tax benefit of $12.8 million, resulting from the release of a deferred tax valuation allowance.

"Westell generated cash from operating activities of over $32 million for the fiscal year," said Nicholas Hindman, Westell Senior Vice President and CFO. "Our balance sheet continued to improve and we remain in a near debt-free position. Our financial strength provides Westell with the flexibility to take advantage of any strategic partnering and acquisition opportunities should they arise. A good example of this flexibility was our $14 million cash acquisition of HyperEdge Corporation in December 2005," Hindman said.

"As we outlined at this time last year, we expected increased market activity in the areas of VoIP, Video/IPTV and wired-wireless convergence and that has occurred. We did not expect meaningful deployments in fiscal 2006; however, we continue to participate in market trials in all of these areas, including some trials internationally. These markets remain opportunities in our future," said Cullens, Westell President and CEO.

Outlook

"In Fiscal 2007 we expect to see continuing increases in market activity in the areas of VoIP, Video/IPTV, in-premise networking, wireline-wireless convergence (FMC/IMS) and multi-functional broadband appliances," Cullens continued. "We believe that our TriLink(TM), UltraLine(TM) and Westell MediaStations(TM) product families have positioned us to help enable the service providers to take advantage of these new markets in an effective and timely manner. A substantial additional investment will be required for Westell to fully capitalize on the many opportunities we have before us. Development of the advanced broadband market is taking longer then expected, but it is coming," Cullens said.

Westell provided guidance for the first fiscal quarter ending June 30, 2006. The Company expects revenue to be in a range of $64 to $67 million. Westell expects EPS to be in a range of $0.02 to $0.03 per diluted share (including a provision for income tax expense in the range of $1.4 million to $2.2 million). The Company's effective tax rate for fiscal 2007 approximates 39%. Westell does not expect to incur any significant cash tax payments for the foreseeable future as a result of the anticipated utilization of net operating loss carryforwards to reduce its cash tax liabilities. The revenue guidance reflects the expected mix of customer promotional activities and the historical seasonality in the June quarter. EPS guidance reflects substantially increasing R&D, marketing and sales expenses, to support expected market growth that is likely to continue into the foreseeable future.

Conference Call Information

Conference Plus, Inc. (ConferencePlus), a Westell subsidiary, will manage Westell's fourth quarter fiscal 2006 earnings conference call on Friday, May 12, at 9:30 AM ET using its new EventManager(TM) Service.

Westell will release its March 2006 fourth quarter results post market close on Thursday, May 11 and host its earnings call on Friday, May 12, at 9:30 AM ET for analysts, shareholders, investors and the public. 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. A URL is also provided to join the web presentation portion of the conference. If a participant experiences any technical difficulties after joining the conference on May 12, simply press star 0 for support.

If you do not wish to register, you can participate only in the audio portion of the call on May 12 by dialing ConferencePlus at 1-877-875-0056 no later than 9:15 AM, Eastern Time and using confirmation number 14609622. International participants may dial 1-847-585-4340.

The Company's earnings press release and any related earnings information to be discussed on the earnings conference will be posted on the Investor Relations section of the Company's website at http://www.westell.com. An archive of the entire conference will be available on Westell's website or via Digital Audio Replay one hour following the conclusion of the conference. The audio-only portion of the conference can be accessed by dialing 1-888-843-8996 or 1-630-652-3044 and entering 8274324#.

About Westell

Westell Technologies, Inc., headquartered in Aurora, Illinois, is a holding company for Westell, Inc. and ConferencePlus, Inc. Westell, Inc. manufactures broadband telecommunications access products. ConferencePlus, Inc. is a collaborative Application Service Provider that manages and hosts voice, video, IP applications and back-office services. Additional information can be obtained by visiting Westell's Web site at www.westell.com.

About ConferencePlus

ConferencePlus, a Westell Technologies, Inc. (WSTL, Trade) subsidiary, is a leading global provider of audio, web, video and IP conferencing services. ConferencePlus is dedicated to providing high quality, innovative conferencing solutions to its domestic and international clients and telecommunications resellers. ConferencePlus is recognized for outstanding customer service and support to help clients meet their business objectives. The company is headquartered in Schaumburg, Illinois with an international headquarters in Dublin, Ireland. Additional information can be obtained by visiting the ConferencePlus web site at www.conferenceplus.com.

"Safe Harbor" statement under the Private Securities Litigation Reform Act 1995:

Certain statements contained herein including, without limitation, statements containing the words "believe," "on track, " "anticipate," "focus," "should," "committed" "expect," "estimate", "await," "continue," "intend," "may," "will," "should," and similar expressions are forward looking statements that involve risks and uncertainties. These risks include, but are not limited to, product demand and market acceptance risks, need for financing, the economic downturn in the U.S. economy and telecom market, the impact of competitive products or technologies, competitive pricing pressures, product development, excess and obsolete inventory due to new product development, 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) and other risks more fully described in Westell's Annual Report on Form 10-K for the fiscal year ended March 31, 2005 under the section "Risk Factors". Westell undertakes no obligation to release publicly the result of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Financial Tables to Follow:


Westell Technologies, Inc.
Financial Results
(Dollars in thousands except per share amounts)
Three Months ended Twelve Months
March 31, % ended March 31, %
2006 2005 Change 2006 2005 Change
-------- -------- ------ -------- -------- ------
Revenues
NSA $12,422 $8,997 38% $43,319 $42,481 (1) 2%
CNE 49,100 57,792 -15% 194,782 183,384 6%
Services 11,543 11,452 1% 45,070 44,398 2%
-------- -------- -------- --------
Total revenues 73,065 78,241 -7% 283,171 270,263 5%
-------- -------- -------- --------
Gross profit
Equipment 15,837 16,553 63,306 58,543 (1)
Services 5,945 6,264 22,493 22,657
-------- -------- -------- --------
Total gross
profit 21,782 22,817 -5% 85,799 81,200 6%
-------- -------- -------- --------
Gross margin
Equipment 25.7% 24.8% 26.6% 25.9%(1)
Services 51.5% 54.7% 49.9% 51.0%
-------- -------- -------- --------
Total gross
margin 29.8% 29.2% 30.3% 30.0%
-------- -------- -------- --------
Operating expenses
Sales &
marketing 6,513 5,590 17% 24,852 22,211 12%
Expense to
revenue 8.9% 7.1% 8.8% 8.2%
General &
administrative 4,199 4,146 1% 16,543 17,368 -5%
Expense to
revenue 5.7% 5.3% 5.8% 6.4%
Research &
development 5,414 4,756 14% 20,274 15,911 27%
Expense to
revenue 7.4% 6.1% 7.2% 5.9%
Restructuring - (341) 443 (793)
Expense to
revenue 0.0% -0.4% 0.2% -0.3%
Intangibles
amortization 414 324 1,386 1,335
Expense to
revenue 0.6% 0.4% 0.5% 0.5%
-------- -------- -------- --------
Total operating
expenses 16,540 14,475 14% 63,498 56,032 13%
-------- -------- -------- --------
Expense to
revenue 22.6% 18.5% 22.4% 20.7%
Gain on sale
of assets - - - 1,453 (2)
Operating income 5,242 8,342 -37% 22,301 26,621 -16%
Other income 575 109 974 896
Interest expense (1) (3) -67% (12) (60) -80%
-------- -------- -------- --------
Income before
minority
interest and
taxes 5,816 8,448 -31% 23,263 27,457 -15%
-------- -------- -------- --------
Income taxes 3,202 (4)(20,122)(3) 10,112 (12,757)(3)
Minority
interest 104 196 304 520
Net income $2,510 $28,374 $12,847 $39,694
======== ======== ======== ========
Income per
common share:
Basic 0.04 0.41 0.18 0.58
-------- -------- -------- --------
Diluted 0.04 0.40 0.18 0.56
-------- -------- -------- --------
Average number
of common shares
outstanding:
Basic 70,307 68,801 69,938 68,473
Diluted 71,712 71,593 71,622 71,042
Footnotes:
(1) The Company earned $883,000 in the three months ended June 30,
2004 for a contractual settlement.
(2) Includes a $1.5 million gain from the sale of NSA assets.
(3) The Company recorded a tax benefit from the release of valuation
allowances against net operating loss carryforwards.
(4) The Company recorded $ 785,000 of additional valuation allowance
resulting primarily from state net operating loss carryforwards
that the Company no longer believes will be utilized.
Westell Technologies, Inc.
Financial Results (continued)
(Dollars in thousands)
March 31, March 31,
2006 2005
---------- ----------
Cash and Short term Investments 42,215 26,960
Receivables 30,121 30,167
Inventory 23,918 26,419
Total current assets 107,401 90,332
Goodwill and intangibles 18,479 13,883
Total assets 191,813 180,090
Total current liabilities 30,859 35,812
Total liabilities and minority interest 34,536 40,432
Shareholders' Equity 157,276 139,658
Days Sales Outstanding 37 35

SOURCE: Westell Technologies, Inc.

Westell Technologies Inc.
Nicholas C. Hindman, Sr., 630-375-4136
[e-mail]
or
KGT Communications Group
Trade/Business Press:
Ken Trantowski, 630-469-8765
[e-mail]