Westell (WSTL) 8 Feb 192019 Q3 Earnings call transcript

Good morning and welcome to the Westell Fiscal Year 2019 Third Quarter Earnings Call. My name is Cheryl and I will be your operator for today's call. At this all participants are in a listen only mode. Later we will conduct the question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. the to turn Chief Minichiello, now Officer. Financial will call Tom over Westell's I begin. may you Sir,

Thank morning third Cheryl. issued westell.com. discuss Westell you, On Good The yesterday the call our Technologies. on fiscal to afternoon conference this is year our release call, XXXX news quarter posted update for and results financial growth we welcome website, will discussion of a for John, President initiatives. I and by Stephen And with we'll Westell's our and taking begin Chief you will quarter the questions. then business results Executive and on Officer, conclude our to

forward-looking Before performance is conference new similar results, this and to because meaningful this statements based and materially reflects comparisons Form please the statements uncertainties and that factors in The of of information the across cause periods. information and also performance forward-looking expressions being identify such non-GAAP Please to for guarantees description both non-GAAP are are results discussion believe, performance A presentation events the These affect Words may and future financial core Westell's that information, SEC filings, measures performance information update reporting XX, The under XXXX, company's we and or achievements, should, facilitates note provide future achievements in present begin, otherwise. factors. supplemental intended XX-K ended reflect financial estimates, as risks or that time and to our involve of may in forward-looking non-GAAP or fiscal company's forward-looking made operating releases our expectations, presentation statements. our management's current future news and are or disclaims March believe such those we discussed. assumptions. ongoing we forward-looking about and the management any investors. note year other statements that trend not future statements Westell statements actual provided the section to made on These any revise as results, date contain that including from Factors. differ of call. Risk obligation expect,

of discussion release. provided to measures. the will comparable call now GAAP reconciliations our most the non-GAAP include in We've today financial measures Our I Steve. over will results news turn to

Good Thank you, Tom. morning, everyone.

fiscal the strong of our XQ larger was driven to segment. from increased our of For ISM monitoring This sequential revenue the for demand customers. attributed increases by remote was X performance

noted before business the from we our last X customer First, rebounded call. quarter domestic during with the

our to System. for additional their global of longstanding and in shipments of of both units software increased one customers pace sites remote upgrades our Optima X licenses another This Secondly, existing markets. tower included Management

outdoor however, overall basis. affected CNS side, growth the on were lower business and conditioners, primarily CNS of seasonally both our was sequentially down. areas, Within network, Fiber IBW safety these our serve important X revenue revenue products DAS public new the and our segments solutions. increased sales Access for for sequential IBW flip the of segments, declined IBW On quarter product a and CNS by which line,

term on are direction improve as to the We financial the target to update now strategic go will I'd like results Tom in consolidated greater detail. build in also value. quarter. we to to as of a moment the are both performance an our growth margin taking more or our exceed in we steps over gross continued heading the more tactical initiatives, long-term well In XX% provide near the

taken for decline, product network been Revenue architectures. periods base collectively, of lines the all, TX shifting start as has base me call largely late not across business, associated the decreasing X with existing the of example, in solutions recent to portfolio our when I Amplifiers network Let has due a interface products business, segments. Mounted what the and but CNS demand or business with and IBW units, dropped in Tower where some, CNS result life-cycle either and natural over

and conditioners. either repeaters held IBW commercial Other panels CNS Cabinets, safety decline sharper IBW fact in fiber our or including our and have essential solutions in data's like the areas of relatively slightly, Distribution grown example, Power our and infrastructure Integrated public Another within products. steady connectivity

given business cycles sales are the other markets. that we all do and ISM three we growing markets changes long can opportunities in emerging term, to And business must and of of of in and we hardware, probability solution today and the penetrating includes efforts, expect investment marketing part comes the better necessary that while end-to-end incremental the business to future. of that however, stable. manage growing near expand and where revenue we operates that remained network the to I add and have portion has the success. and the business, undoubtedly an highest believe, it software our making we're steady services growth where monitoring changes there expand Westell's will some when remote Additionally, that offer to do businesses of Market more in reprioritization the both are need

Citizens on is on solution with goes name. believe the spectrum, CBRS, we with largely early me IBW, Radio the networks, are brand entrant, Let enterprises. an based benefit by which be to or development we intend a This start making private small-cell we our where market of LTE Broadband ip.access, OnGo targeting also Service, progress which new partner, a and

own networks connections wireless our noted OnGo cost secure their operate more cellular attractive call, enable an effectively all critical As have operations. across last on enterprises with that their should to alternative private

healthcare, interest variety a market and of positive such feedback, gaming, field including received as hospitality verticals trials have across manufacturing. in We

believe time be to So given to we share And market market think capture early. situation, significant. potential the is what we is competitive a critical will

been plus Staying the it than have in business, revenue to has the now units half release repeaters, And first our We are current like public of third two market product fiscal smaller small due of safety the our our have in years for in line currently back this components. product year. the while anticipating backup the current general set. XXXX, grown remained passive OnGo battery we IBW, of with of and limitations quarter we operating of with we'd cell with

As portfolio, mentioned revenue much we expand meaningful in to the have significantly add that past, working the been partnership we've arrangement product a potential more public growth. would safety on our with

we While towards to offerings. our longer of in line projected, believe market the a to of plan potential than product work this continue complete has strongly and taken initially goal

a we more like for steady that given customers network demand. on the that, segment, information increasingly the Moving in favorable and especially economics ISM connected the held business monitoring to mentioned, more real in devices, remote network a our time where with and is at as to the edge, more world operators provides has and intelligence that

a go-to-market as areas we select adjacent business, and ISM power our continue to service other cable While with approach sales and the longer and providers, cycle resources added than have telco have refining to will and sales in potentially verticals markets. of utilities such expanding tends service international customers ISM cell our business, to add provider

cloud an market expansion, we partnership industrial vertical service. Optima of are leveraging on example our an pump discussions in monitoring solution As currently

higher for single-family grow in which portfolio requirements, and user fiber new we delivering higher to the broadband and multi-dwelling future, speed, XG way Fiber all continue requires the today capacity units. across increasing our For to quality address the Access the to CNS, enterprises, connectivity both end extending ever bandwidth homes

and cabling, the coexistence terminated high-density panels fiber within and data offices. central outside products, of along Our technology convergence are designed services wireless and low-profile fiber with and office, which cassette new network ruggedized customer simplifying to central premise enabling wireline operators deployments economically plant deliver network and by date fiber environments, to help include densification, in quickly centers

revenue quickly including are execution We we've today pace September revenues we and three with solutions bring quarter, key December In with recognized ability grew market received acceptance first first market, them. the and to with recognized two growth the our the third of In the two new customer from this the of fiber we excited seen. first quarter, orders revenue with the and our in customer. initial to our our customers

we set, entirely customers within business coming our out you've key add new in heard to and be codevelopments and We expect with more the initial it a continue Westell now customers product By solutions with development, the to months. build established have product common grow or around theme partnerships.

features. broadband remote new, the densification In wireless expansion and product Access to, addition to Fiber fixed solutions cell among line fuse unit builds new portfolio public small suite panels, applications new development, Cabinets fire safety and of a OnGo that the for Integrated a of utility ISM new recently companies, we lower-cost communication added more adding more with useful aforementioned and of advanced network distribution and specifically continue we our have the

on match. Let to inorganic me came deal thought have a makes growth and and ever-increasing closing the right on to it that the board get including deal I But ultimately and move with businesses on just engaged, right our into has a we deal we've potential been Since not to around could the targets the do be of continued criteria. build pipeline intend phase, meets diligence that be to a actively sense two right done. discussion an acquisitions. We

not meet that, examination, So on did passed we opportunities have after deeper our criteria.

of through targets. growth two are continue of currently right actively expand now feel to making pipeline that our the and continue acquisition to we're others on. We good in middle pursue we and And we progress aggressively potential

business each direction least one to in, growth driver Let the up three meaningful me by having is all wrap that way. with the leading we heading segments, reinforcing at drive across one growth are

working extensions partnerships and outlined, that expand and existing and right enable just to penetrate that and actively I acquisitions the adjacent are three markets. our us initiatives As on natural pursuing internal in and are of businesses we

provide profitability business mission the With expand to over back drive turn call and Our me the number value. Tom. that, one shareholder is to let increased and

Steve. you, Thank

added some provide revenue. color me beginning our with quarterly Let on results,

$XX.X fiscal revenue X% of increase overall compared increase in $X.X was XX, million the XXXX, our The third ISM performance XQ. quarter driven strong of by the quarter September second ended ended doubled in million For sequential to $XX.X fiscal XX. which to million, an fiscal revenue nearly quarter in was December segment, the

orders the during and that rebounded As call, slowed ISM quarter the before. down significantly from noted their expected domestic quarter's one customer we had revenue last

quarters Additionally, products. revenues to was strong in customer in increases winter due to segment XQ, and are network, IBW quarter this new sequential public revenue were in another the by and commercial quarter large upgrades safety deployed for did, lower partly passive was for conditioners Steve two markets. lower December global existing increased the and Fiber of Within offset resulting of lower offset pace October IBS CNS revenue partly in our tower both we DAS by components predominantly in during Access as CNS sales products sites system for fiscal outdoor ISM The their down approaching mentioned, as Within the solutions. repeaters revenue increase through months. seasonally the the CNS.

XQ results, XQ fiscal operating on professional primary in target within XQ. from $X.X of were and in margin expenses ninth Moving gross the drivers. marking was and rest sales million service consolidated quarter of the marketing in QX $X.X in up investment we the Non-GAAP XX.X%, consolidated million, and our the Increased from XX% up or in to greater. expenses G&A exceeded consecutive in margin operating fiscal gross which XX.X% were

higher loss net fiscal of EPS was better Our than XQ loss and the loss gross and increased revenue operating profit and OpEx. the XXXX, in non-GAAP months net in non-GAAP the X Non-GAAP $XXX,XXX, XQ $XXX,XXX, Year-to-date ended and more was as $X.XX XQ slightly offset share per EPS income the in XX, share. compared was $XXX,XXX per and $X.XX share $XXX,XXX per $X.XX and XQ. $XXX,XXX December to for than

operating first per the $X.XX share was GAAP million XQ XXXX, share EPS adjusted depreciation, loss net per non-GAAP which XQ. and and through EBITDA, months is was X $X.X positive compared Additionally, in $X.XX $XXX,XXX. in fiscal less our and of million $X.X profit to

May quarter repurchased price working XXth. Cash an share sheet, XX, an XXbX-X of at program XXXX, per increased of To $XXX,XXX. Westell market of repurchased in compared and shares XXX,XXX cash capital $XX.X average has balance during for million of to XXX,XXX by a XQ as million $XX.X $X.XX May at XXXX December a of from price for primarily XXXX date, average part total the at of plans, of Board and our the in Under to open $X, our total authorized total due was XX, the used to Westell share, XXX,XXX. September per $X.XX share, to December at repurchases. totaled a stock Directors fiscal shares of Turning repurchase XXXX,

let summarize. we Q&A, me Before to move on

markets. areas steady of grow taking and steps in business that operate to are growing our base We those

We new inorganic and Fiber partnerships in are acquisitions. continuing we aggressively OnGo are like focused on to Access, growth make progress areas through and and growth

So now the up with to we'd your like questions. call open that, for

Investment. [Operator our from first Silk comes line Mark, Instructions] And Marc your Silk is question open. from

other on of the Or that daily of it's office will on that XX% to your of to stick RC generation impact buildings saw try capitalize you news, said article inside with anything So day commercial the significant you forward? that XG I want Is that just strategy buildings. on? nearly competitive consumed with just going cellular operations of too can have data next an a the Wireless

that of nature the delivering will from of to the growth facilitate address that the is specific of to with cellular both to as the the is for to continue because opportunity operators in-building push wireless Well, exists This an growth in-building allocated believe private OnGo and unique in-building. opportunity. WiFi important way of is certainly of part But to OnGo coverage. that of and We be of the to spectrum away development area fund building LTE process the the into the business large venues cellular that move be owners. going to market in desire going some Steve. wanting we're the coverage

be we player in So plan a significant to that.

very that's encouraging. Yes,

talked you lot growth. about So a inorganic

healthy think you're is going I'm they telcos, And you it experience great that's my a to makes a sense, about partnerships, not key. what is do So of you with about unless talked encouraged because with balance part purchase companies I which like a a sheet. definitely the need

cognizant I which, an you're this of, very of you is true make situation you're I afraid I'm because dual from that a acquisition, if sure because you of again, of that. here, and this is ownership My investors don't dead and I'm beat issue hate of. So to the horse talked get going of is, care to stock, what if until okay, this, I've away stay they know taken value to

responsibility the I fiduciary a up but but Penny the has So think a hate to issue, Mr. do trust. conflict shareholders he thing, has fiduciary I again, bringing there's right the for because an a to responsibility

got this be this handled rectified. to can it's hopefully be So year,

I think think when What something hold cutting doing at everything. you're leave you you're onto. And But your you're focus from doing XX and doing million this get you I your that. just someone right Let's hands enterprise in be it the because X sales. discouraging very Because costs, is that I because job. person have a call who's a now great interested love have a I to Right want and over to value of it's I it's want again, tied the million don't you're I you're balance job. sheet. for

up the work. So keep anyways, good

is, that loud clear. numerous conversations. and family I've had say thing has The I'll to Yes, the you Mark. heard

the open-minded is issue. is believe And on think the it. when address I right they'll time this family I very

I stock to will when want around in I growth in absolutely think all is address the value and right that. the The has see we think conversation continued that. family the been time very their open we of

sheet you're because technology. the encouraged balance and area said, I'm that's of all with steps you're and Great. right. you're assets making seems long-term over your the think the one biggest doing next and years right I I Because, I like right is right your the few you're things And and think the in focused like

you to understand. it sounds So like me

and going lot So good forward. thanks a luck

Resources. line from Steve, open. And your comes our Instructions] Steve next Busch is from Everglades [Operator question

mode enterprise see Are buying back you we given now, that still still. stock to guys Glad right in the value?

quarter. Yes, do this a place fourth Steve, have is still in Tom. plan We into the

there So into the fiscal fourth share continued will be quarter. repurchases

at we're acquisitions. continue at also in it and deployment the because looking of look evaluate examine We and to it cash it light

the the on our Right? deploying and So we're cash in right continuing between out stock is using repurchases cash to investments for figure what balance there growth.

even but just the be appreciate But And deal are I investing it's forward looking would me you Absolutely and got it's in because got. growth just questions. initiatives. cheap, right, now nice, so best so probably million let another million, $XX mean, ask two I you incredibly yes. right towards -- other we've guys you've growth

kind color of all kind big are We I don't so companies? and you the or your in like issue. co-partnerships scale. understand you're of can What you we works, small, an who looking have at add lot or on any a Ericsson? some that's Is looking of you that stuff smaller at? companies, Are an do -- elaborate

there question, growing the data address network. sauce specific the And that LTE-type partnership certainly the percentage we developing applications without that are has kind too space. a and building. can a inside of ip.access of history usage the LTE a Clearly, as that of type solutions opportunity small happens capabilities, with company of are a much. is responded good wireless see to needing of aspects secret more I building. that a the to partnership some And Mark's in to of Yes, significant more with of exposing in reliability, healthy cell security, be resiliency going I But

we're excited about development. that So

a of business. only you million today $XXX a which portion. public the products, will address breadth a $XX in an million have has company the segment a us on segment market, name development withhold good that and significant safety When But the experience on, we at in-building we We ability address a a reputation time being. industry, to larger the the for relation- broad the that going of a company it's can safety extended I of public is side. believe annual -- will look give the

annual grow that million -- continue we next million the over years. $XXX $XXX is projected and business to As four course about the to of

what portfolio advantage able a our of can't the to and of advantage take we're do So be the to growth of then take expand from market looking is to $XXX address segment CAGR that million standpoint. double-digit today, product that remaining we

So those to NACs we're an standpoint the focus network, are the of continue what growth partnerships our most of on the and with of facilitating interest. doing the we two with densification XG at and from as Ericssons look likes wireless and meaningful. be edge the [ph] Certainly OEM and

as We well have we of get conversations those hard attention but constantly types those going companies. entertain But larger types it's some to OEMs, know, the conversations. on likes you those the of with of continue of of to

That's fair Okay. enough.

Just to about actually, question get let statement ask back on well, the another me to operational side. your you --

So on that? net basis? hitting any a profitability cash kind got even think you do when positive we'll You GAAP outlook be or of flow on per-share

Yes.

the Steve, assuming current So non-GAAP around revenue, quarterly margin. million a of basis low-XX% to the OpEx level on $XX million gross given is breakeven $XX in and a

to you mean, X is money. quarters So back I all have look where the making we do were at

could the model the all looked work you quarters previous not before at that quarter quarter if and point. the from back last see You but

your to these see with be those for us back that that products. the Yes, said, $XX investments clear to It's to our $XX not getting profitable of horizon which in sales again. to marketing the that making kind over and then million at ability and create some quarters, Steve, would and new if million, hard way look and out you of we're look

timeframe kind you what looking $XX that $XX are mean of X for I but it million? years? Is million X -- to quarters, So

year within certain. coming will this fiscal be It for

Within fiscal year.

That's good know. actually That's right. really All know. to good Okay. to

I to time Penny not time had said you right But So I'm Family make does I and make Trust is What the so that Mark, of the make know beat the right? getting when kind to that the when offline the to tradeoff. right? mean, much. time we've What going for the comment is that you to think did A/B, it, conversations back too about would

stock being trust. this appreciation is right to general very the speak the when number and been conversation. so open start everyone I they to tell from can't I for sense in time will the And have they I at I that that for makes that will value statement, think point. it you I say But them. I see Well, we just to What don't conversation. have know for that is been can't a that speak open

really convert time announcement will next appreciation I just they But at not I appreciate you. sort you And just case value in some shares into to see I'll a they on shares right to process. guys add, quicker. that doing good But regular of in it's anyway, a are would sort you'd Right. maybe so they listening, to started and be forward the And directed of begin then if the probably to stock the the it look job. some -- are call. do

comes question O'Connell Investments. is next open. Our Tim your Insight from Tim, from line

comments I also wanted up and the to caller. previous follow Silk's on Marc

So I'm in interest an institutional investor that Westell. has a lot of

kind And what so would these the of PCTEL And they said. that. A/B investment kind going for has But been on going make to keeping I'm years of a from is at significant endorse valuations. look we us doing conversation on this. This shares of to in kind

say that getting hasn't converted. they following to want change. going on are comment, they has in of are when last up those to terms for that, the that's you this on years. just while There And happen price to been minded, the gone any open conversation entertain So

a I investment larger by on doing be of now radar going this So lot conversion, mean, the Westell is community. to

us who's And just very ones. far only Family but the from by know to reasoning's out. as someone we're it at here, just Trust. and saying would I positioning be kind this me, So It Penny is this make looking of doesn't illogical the seems interested keeping the we the sense

are those for my today. comments So

they're comments, But on don't of I investors. appreciate our Well, we Tim. the said, appreciate I position falling do ears. the think And deaf as

comes question next from Our Mark from Siegel Capital. Stanford

maybe And don't picked the B now. know, Class we what we X% shares up was selling have, pretty Well, I around in we're shareholders. November/December. guess much of new I Royce

things. So couple of

is to is merging a reiterate which two isn't stock they'll comments classes. share the because the the higher. the want it's that obvious reason stock separate for them share last to of is mean, price guys, the I from why price higher I consider circular obvious bit say the once the First, classes

said, So my and guess an attracted an basis be a guys very are. good was gross they considering that margins might opportunity I to what incredibly That time. on how me waiting EV-to-revenue price long you your was low

So you growth that's a I selling, revenue longwinded my bought even way do would or to know, make and you guess any you I of now I organic either of mean, that. that also urging because, or like through something I which XX% partnerships, organic, you're somewhere guys be around don't

buy company company that. it. a You'll never willing that of kind something is to at anywhere price, that wrong able If a to sell there's somebody to close be for revenue worth their multiple you buying decent with

mean, partnerships. you to I'm much themselves and shooting this again, as in initiatives. as foot this about can family, So you via with I glad I thing. organically just to urge these do And they're controlling hear the

you of Tuesday. guys selling publicly isn't headed people, for unless traded there, out company family there that's If Penny bankruptcy next another you at it's revenue are XX%

what you. that's to have Thank I So say.

Thanks, Mark. it. appreciate I

additional Instructions] in Steve further over I [Operator back speakers, have queue. turn any for I will the And to no call questions comments. now

everyone, joining Thanks, us for today.

speaking you have on our to we the forward business again grow to call. look mentioned, next and much shareholder drive do value. to to As up We

participation. This conference. you, your thank for today's ladies Thank you gentlemen. And concludes and

disconnect. now You may