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Westell Technologies Inc. Reports Operating Results (10-Q)

February 05, 2010 | About:

10qk

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Westell Technologies Inc. (WSTL) filed Quarterly Report for the period ended 2009-12-31.

Westell Technologies Inc. has a market cap of $85.9 million; its shares were traded at around $1.25 with a P/E ratio of 12.5 and P/S ratio of 0.5. WSTL is in the portfolios of Chuck Royce of ROYCE & ASSOCIATES.

Highlight of Business Operations:

CNS revenue decreased 19.4% in the three month period ended December 31, 2009 compared to the prior year period primarily due to a $6.7 million decline in sales of the ULS3 product. During the quarter ended December 31, 2009, sales of the ULS3 product were $3.8 million compared to sales of $10.5 million in the comparable period of the prior year. CNS revenue increased 37.3% in the nine month period ended December 31, 2009 primarily due to a $12.5 million increase in sales of the ULS3 product, which were $23.2 million compared to $10.7 million in the comparable period of the prior year. The Company recognized revenue for ULS3 product starting in the quarter ended December 31, 2008. Revenue from modems decreased in the three and nine months ended December 31, 2009 compared to the same periods in the prior year, with unit sales decreasing in the comparable three month period and increasing in the nine month comparable period. Gateway product revenue and unit sales increased in both the three and nine months ended December 31, 2009 compared to the same periods in the prior year. During the three and nine months ended December 31, 2009, the average selling prices of modem and gateway products declined compared to the same periods of fiscal year 2009 following product technology trends and contractual terms.

Sales and marketing expense in the OSP segment decreased 9.2% in the three and nine months ended December 31, 2009 compared to the same periods ended December 31, 2008. The $114,000 and $372,000 three and nine month decreases were due primarily to the reduction of employee headcount resulting from past reorganizations, lower bonus targets for remaining employees and the elimination of a 401(k) match that collectively resulted in reductions of $95,000 and $270,000 in personnel-related expense, respectively. The remaining sales and marketing expense reductions in the three and nine months periods resulted from lower spending across most sales and marketing expense categories, including travel and meetings.

Sales and marketing expense decreased 24.9% and 23.2% in the ConferencePlus segment in the three and nine months ended December 31, 2009 compared to the same periods ended December 31, 2008. The $526,000 and $1.7 million three and nine month decreases were due primarily to the reduction of employee headcount resulting from past reorganizations, lower bonus targets for remaining employees and the elimination of the 401(k) match that collectively resulted in reductions of personnel-related costs of $448,000 and $1.2 million, respectively. The remaining sales and marketing expense reductions in the three and nine month periods resulted from lower spending generally, including items related to travel, meetings and tradeshows.

Research and development expense in the OSP segment increased by 9.2% and decreased 10.0% in the three and nine months ended December 31, 2009 as compared to the same periods from the prior year. The $47,000 increase in the three month period was due primarily to increased product certification costs. The $194,000 decrease in the nine month period was due primarily to a $112,000 reduction in consulting expense and lower spending across most research and development expense categories, totaling $82,000.

The ConferencePlus segment general and administrative expense decreased by 30.5% and 25.1% in the three and nine months ended December 31, 2009 compared to the same periods in fiscal year 2009. The $666,000 decrease in the three month period resulted primarily from stock-based compensation expense that was $365,000 lower than the prior year period. The $1.5 million decrease in the nine month period resulted in part from the reduction of employee headcount which caused a $275,000 decrease in personnel-related expense. The remaining reductions in the three and nine month periods were due to reductions across most general and administrative expense categories including professional services, depreciation and allowances for bad debt.

Unallocated corporate general and administrative expense increased 56.1% and decreased 34.4% in the three and nine months ended December 31, 2009 compared to the same period in fiscal year 2009. The increase of $554,000 in the three months primarily resulted from $730,000 of cumulative prior year stock-based compensation expense that was recorded in the current period (See Note 9 of the Condensed Consolidated Financial Statements). The decrease of $1.6 million in the nine months primarily resulted from a reduction of legal expenses by $1.1 million. The legal expenses in fiscal year 2009 primarily related to costs incurred in connection with the previously disclosed SEC investigation. As announced in August 2009, the SEC completed this investigation without any enforcement action. Stock-based compensation also decreased by $209,000 in the nine month period of fiscal 2010 compared to fiscal 2009. The remaining reductions in the three and nine month periods were due primarily to lower outside professional services expenses.

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