Westell Reports Second Quarter Fiscal 2000 Results - Company Financial Information

Cambridge Telcom Report, Nov 1, 1999

Westell Technologies, Inc. (Nasdaq: WSTL) has announced results for its second fiscal quarter ending September 30, 1999.

For the three months ending September 30, 1999, the net loss per common share was 8 cents representing an improvement from 9 cents, 23 cents and 26 cents in the prior three quarters. For the same period last year, net loss was 28 cents per share.

The net loss of $3.1 million compares to a loss of $10.2 million in the same quarter last year and a loss of $3.4 million in the June 30, 1999 quarter. Operating expenses decreased $6.7 million or 44.4% from the same quarter last year and decreased $2.1 million or 20.2% from the quarter ended June 30, 1999.

Gross margins for the quarter were 22.5% compared to 20.3% for the same period last year. Gross margins in the quarter ended June 30, 1999 were 31.1%. Costs tied to initial DSL volumes and, competitive DSL pricing contributed to the decline in gross margins in the current quarter. The company expects improvements in future quarters resulting from aggressive cost reduction programs.

Total revenues were a record $25.0 million, a 10.3% increase over revenues of $22.7 million in the same period last year. Service revenue for the quarter increased 62.8%, over the comparable quarter last year, to $7.7 million. Customer Premise Equipment (CPE) revenue climbed 67% relative to the same period last year to $2.0 million. Transport Systems posted sales of $2.5 million, a 7.7% increase over the same period last year, while High Capacity Products (HiCAP) revenue declined 11.1% relative to the same period last year to $12.8 million.

"This quarter's results continue to validate the strategies and plans we have been communicating since the beginning of this calendar year," remarked Nicholas Hindman, Westell CFO. "Our operating expenses and operating loss continued to decline. We posted record revenues in the quarter as our CPE and Transport Systems business units posted strong gains. Service revenue climbed significantly in line with our belief that our subsidiary, Conference Plus, Inc. (CPI) will achieve 50% revenue growth in FY2000 vs. FY1999. Despite strong gross margin pressure in the quarter, we showed a decrease in net loss, a trend that has continued over the prior four quarters. We expect to see margins improve as we realize the savings associated with increasing volumes and as cost reduction measures take effect in our DSL business."

Westell Technologies, Inc, headquartered in Aurora, Illinois, is a holding company for Westell, Inc. and Conference Plus, Inc. Westell, Inc. manufactures and licenses DSL systems and value added Customer Premise Equipment, and manufactures telecommunications access products. Conference Plus, Inc. is a multi-point telecommunications service bureau specializing in audio teleconferencing, multi-point video conferencing, broadcast fax, and IP multimedia conferencing services. Additional information can be obtained by visiting Westell's Web site at http://www.westell.com .

                  Westell Technologies, Inc.
                Comparative Financial Results
(Dollars in thousands except footnotes and per share amounts)

         Three Months ended Sept. 30,   Six Months ended Sept. 30,
              1999       1998 % Change    1999      1998  % Change
                 (unaudited)                (unaudited)
Revenues
  HiCAP    $12,799    $14,399  -11.1%  $26,623  $ 28,943    -8.0%
  Transport
systems      2,523      2,343    7.7%    4,712     4,997    -5.7%
  CPE        2,004      1,200   67.0%    3,179     2,388    33.1%
  Services   7,678      4,718   62.8%   14,649     9,345    56.8%

Total
 revenues   25,004     22,660   10.3%   49,163    45,673     7.6%

Gross profit 5,625      4,598   22.3%   13,131    11,512    14.1%
Gross margin 22.5%      20.3%            26.7%     25.2%

Operating expenses
  Sales &
   marketing  3,414     5,261  -35.1%    7,112    10,030   -29.1%
    Expense to
   revenue    13.7%     23.2%            14.5%     22.0%

General &
 administrative3,377   3,282    2.9%    6,617     6,273     5.5%
    Expense to
  revenue  13.5%     14.5%            13.5%     13.7%

Research &
development1,619(A)     6,578  -75.4%    5,216(A) 12,708   -59.0%
 Expense to
  revenue      6.5%     29.0%            10.6%     27.8%

Total operating
  expenses   8,410     15,121  -44.4%   18,945    29,011   -34.7%
   Expense to
    revenue  33.6%      66.7%            38.5%     63.5%

Operating
loss        (2,785)   (10,523) -73.5%   (5,814)  (17,499)  -66.8%

Other income    74        348  -78.7%       51       783   -93.5%
Interest
 expense       348         66  427.3%      728       156   366.7%

Loss before
tax benefit (3,059)   (10,241) -70.1%   (6,491)  (16,872)  -61.5%

Benefit for
  income taxes --(B)       --      NM      --(B)      --       NM
Effective tax
 rate         0.0%       0.0%             0.0%      0.0%

Net Loss   $(3,059)  $(10,241)     NM  $(6,491) $(16,872)      NM

Basic and diluted
  loss per common
  share       (0.08)    (0.28)     NM     (0.18)   (0.46)      NM

Average number of common
 shares outstanding
  Basic &
Diluted (C) 36,570     36,422           36,519    36,417