Westell Technologies' CEO Discusses F4Q12 Results - Earnings Call Transcript

Westell Technologies, Inc. (WSTL)

F4Q12 (Qtr End 03/31/2012) Earnings Call

May 17, 2012 9:30 am ET


Brian Cooper - CFO

Rick Gilbert - Chairman, President and CEO


Mike Latimore - Northland Capital

Greg Burns - Sidoti & Company

Jeff Linroth - Leaving It Better

Todd Brady - Oppenheimer



Welcome to the fourth quarter fiscal 2012 earnings conference call. (Operator Instructions) I will now turn the call over to Brian Cooper. Mr. Cooper, please go ahead.

Brian Cooper

Thank you. I want to welcome everyone to our conference call covering the annual and fourth quarter results for Westell Technologies during our fiscal year 2012, which ended March 31.

We issued our earnings news release last night as well as a new release announcing our acquisition of ANTONE Wireless. We will refer to these news releases which are our posted on our website westell.com. On this call Rick Gilbert and I will update you on the business, our strategy and our financial results.

Before we begin please note that our presentation and discussion contain forward looking statements about future results, performance or achievements financial and otherwise. Words such as believe, expect, and anticipate, estimate, plan, outlook, trend and similar expressions are intended to identify such forward looking statements. These statements reflect management's current expectations, estimates and assumptions.

These forward looking statements are not guarantees of future performance and involve risk and uncertainties that may cause Westell's actual results, performance or achievements to differ materially from those discussed. Our descriptions of factors that may affect our future results is provided in the company's SEC filings including Form 10-K for the fiscal year ended March 31, 2011 under the section risk factors.

The forward looking statements made in this presentation are being made as of the date and time of this conference call. Westell disclaims any obligation to update or revise any forward-looking statements based on new information, future events or other factors. Our presentation today also will include non-GAAP financial measures. We have provided reconciliations to the most comparable GAAP measures in our earnings press release which is available on our website westell.com.

I will begin this morning with a review of the financial results for our fiscal fourth quarter and the full year ending March 31, 2012. I will then turn the call over to Rick Gilbert, Westell's Chairman and Chief Executive Officer who will provide some perspective on our performance and strategic direction.

Fiscal year 2012 was clearly a year of significant change for Westell and I'm happy to say that we ended the year on an up note. After an extraordinarily weak third quarter, we experienced a broad rebound in our fourth quarter across most of our products.

Customer buying patterns did not appear to be back to normal but they definitely improved. I will focus most of my comments about financial results today on that fourth quarter which is where the news is.

Before I get into specifics, please note that there are few factors including two major transactions that affect results and comparisons. First we completed the sales, most of the assets in operations of our Customer Networking Solutions division to NETGEAR.

This CNS sale transaction closed on April 15, 2011. Westell retained one customer and as planned and announced have been winding it's sales to that customer during the fiscal year.

Second, Westell sold its Conference Plus subsidiary on December 31, 2011. As a result of this sale transaction Conference Plus is reported as a discontinued operation and its results are no longer included in historical results for continuing operations.

Third, the prior year fourth quarter included about $53.2 million tax benefit as a result of releasing valuation allowance against deferred taxes. In fiscal 2012, fourth quarter contains some tax adjustments as well, albeit much smaller ones.

Also of note we have renamed the Outside Plant System division also known as OSP. It is now the Westell division. For the fourth quarter of FY '12, Westell Technologies reported consolidated revenue from continuing operations of $11.3 million compared with $38.5 million in the fourth quarter, a year ago.

Conference Plus revenues are not included in either period, the decline results from the plant reduction in CNS revenue which dropped by $22.7 million and from a $4.5 million dollar reduction in Westell division revenue.

EPS for the quarter under Generally Accepted Accounting Principles was a loss of $0.04 per diluted share. This compares with income of $0.79 per diluted share in the prior year fourth quarter. These results include impacts from the CNS and Conference Plus sale transactions, a one-time claim restructuring and income tax adjustments.

Taking these impacts into account, EPS on a non-GAAP basis was a loss of $0.01 per share in the FY '12 fourth quarter compared to earnings per share income of $0.03 per share in the fourth quarter a year ago. Our non-GAAP results are reconciled to GAAP results on the final page of the earnings news release.

From a divisional perspective, the Westell division reported revenues of $10.7 million for the fourth quarter. This is down $4.5 million or 29% compared with the fourth quarter of FY '11. However, we did benefit from some rebound in the market during the quarter. Revenue for the division is $3 million higher on a sequential basis, up 40% compared to the third quarter of FY '12.

Compared to the third quarter, the fourth quarter benefited primarily from stronger demand for fuse penal, mountings and closures and custom systems integration services.

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