Overview
The following discussion should be read together with the Condensed Consolidated Financial Statements and the related Notes thereto and other financial information appearing elsewhere in this Form 10-Q. All references herein to the term "fiscal year" shall mean a year endedMarch 31 of the year specified.Westell Technologies, Inc. , (the "Company") is a leading provider of high-performance network infrastructure solutions focused on innovation and differentiation at the edge of communication networks where end users connect. The Company's portfolio of products and solutions enable service providers and network operators to improve performance and reduce operating expenses. With millions of products successfully deployed worldwide, Westell is a trusted partner for transforming networks into high performance, reliable systems. COVID-19 Impact InMarch 2020 , theWorld Health Organization declared the spread of COVID-19 a pandemic. During the first quarter of fiscal year 2021, this outbreak grew and continues to spread throughout theU.S. and around the world. As a result, authorities continue to implement numerous measures to try to contain the virus, including restrictions on travel, quarantines, shelter-in-place orders, business restrictions and shut-downs. The Company is considered an "essential business" due to the industries and customers we serve, including critical telecommunications infrastructure. Accordingly, we have followedCDC recommendations and have continued operations with enhanced safety precautions throughout the pandemic. To support the health and well-being of our workforce, customers, partners and communities, all of our employeeswho do not have critical in-person functions have been working remotely to lower the number of people working on-site at any given time. For those employees working in our facilities, we have instituted mediation measures including increased distancing of workstations, more frequent cleanings, face mask requirements, restricting access to our premises, and other safety precautions. We expect to continue our mediation efforts for the foreseeable future. The impact of COVID-19 continues to evolve. There is significant uncertainty around theU.S. and global economy, future customer demand, supply chain availability, increased airfreight costs, cash collections, costs related to our mediation efforts and costs and timing related to anticipated easing of shelter-in-place and shut-down orders going forward into the remainder of the fiscal year. These uncertainties include the duration and severity of the pandemic and containment measures and how our compliance with these measures will impact our day-to-day operations as well as that of our customers, contract manufacturers and other supply chain partners. 20 -------------------------------------------------------------------------------- Table of Contents We are continuing to monitor developments related to the pandemic on our own operations as well as on our suppliers, contract manufacturers and customers. We intend to adapt to the evolving environment while acting to ensure the health and safety of our employees. OnApril 14, 2020 , the Company received$1.6 million pursuant to a loan under the Paycheck Protection Program (the "PPP") of the 2020 Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") administered by theSmall Business Association . The Company used all of the funds from this loan only for the purposes included in the PPP (See Liquidity and Capital Resources). Segments The Company's three reportable segments are as follows:
Intelligent Site Management ("ISM") Segment ISM segment solutions include a suite of remote units, which provide machine-to-machine ("M2M") communications that enable operators to remotely monitor, manage, and control physical site infrastructure and support systems. Remote units can be and often are combined with the Company's Optima management software system. ISM also offers support services (i.e., maintenance agreements) and deployment services (i.e., installation).
Communications Network Solutions ("CNS") Segment CNS segment solutions include a broad range of hardened network infrastructure offerings suitable for both indoor and outdoor use. The offerings consist of integrated cabinets, power distribution products, copper and fiber network connectivity panels, and T1 network interface units ("NIUs").
Customers
The Company's customer base includes communications service providers, systems integrators, neutral-host operators, and distributors. Service providers include wireless and wireline carriers, cable or multiple systems operators ("MSOs"), and Internet service providers ("ISPs"). Due to stringent customer quality specifications and regulated environments in which many customers operate, the Company must undergo lengthy approval and procurement processes prior to selling most of its products. Accordingly, the Company must make significant up-front investments in product and market development prior to actual commencement of sales of new products. The prices for the Company's products vary based upon volume, customer specifications, and other criteria, and are subject to change for a variety of reasons, including cost and competitive factors. To remain competitive, the Company must continue to invest in new product development and/or in targeted sales and marketing efforts to launch new product lines and features. Failure to increase revenues from new products, whether due to lack of market acceptance, competition, technological change, purchasing decisions, meeting technical specifications or otherwise, could have a material adverse effect on the Company's business and results of operations. The Company expects to continue to evaluate new product opportunities and invest in research and development activities. In view of the Company's reliance on the communications infrastructure market for revenues, the project nature of the business, the unpredictability of orders, and pricing pressures, the Company believes that period-to-period comparisons of its financial results should not be relied upon as an indication of future performance. The Company has experienced quarterly fluctuations in customer ordering and purchasing activity due primarily to the project-based nature of the business and to budgeting and procurement patterns toward the end of the calendar year or the beginning of a new calendar year. While these factors can result in the greatest fluctuations in the Company's third and fourth fiscal quarters, this is not always consistent and may not always correlate to financial results. Other Matters At the Annual Meeting of Stockholders held onSeptember 29, 2020 , the stockholders approved a transaction whereby the Company would effect a reverse/forward stock split of the Company's shares of Class A Common Stock and Class B Common Stock, in conjunction with terminating the Company's public company reporting obligations and delisting the Company's Class A Common Stock from the NASDAQ Capital Market. This transaction was effectuated onOctober 1, 2020 . As a result of the Transaction, the Company paid$7.2 million to repurchase approximately 4.9 million shares of the Class A Common Stock at a purchase price of$1.48 per share. 21 -------------------------------------------------------------------------------- Table of Contents The Company is currently evaluating whether our previously generated federal net operating losses and federal tax credits would be limited under Sections 382 and 383 of the Internal Revenue Code ("Section 382"). The limitations under Section 382 apply if an ownership change, as defined by Section 382, occurs. Generally, an ownership change occurs when certain stockholders increase their aggregated ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years). The Company has significant tax assets, in the form of carryforwards of net operating losses and tax credits, which are fully reserved. These assets nonetheless represent potential value to the Company by virtue of their ability to reduce income taxes payable. The Company's ability to utilize such assets may be limited by transactions such as the Transaction, particularly if ownership changes trigger certain provisions of Section 382. OnOctober 9, 2020 , in conjunction with the process of terminating the Company's public company reporting obligations and delisting the Company's Class A Common Stock from the NASDAQ Capital Market the Company filed a Form 25 with theSEC . OnOctober 21, 2020 , theFinancial Industry Regulatory Authority ("FINRA") notified the Company the Class A Common Stock may be quoted and traded in the market for unlisted securities (the "over-the-counter-market" or "OTC"). Westell Class A Common Stock is currently trading on the Pink Open Markets under the symbol "WSTL". Information concerning the transaction is set forth in the definitive proxy statement for the Company's 2020 Annual Meeting of Stockholders, which was filed with theSEC on Schedule 14A onAugust 11, 2020 . Stockholders are urged to read the definitive proxy statement carefully. Results of Operations Below is a table that compares revenue for the three and six months endedSeptember 30, 2020 , and 2019, by segment.
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